Landmark 1977 Fair Lending Law To Join Digital Era

Rules enforcing the Community Reinvestment Act, a 1977 law encouraging bank lending to low- and moderate-income neighborhoods, are woefully behind the times, according to regulators.

Three banking agencies on Thursday jointly proposed a host of changes intended to modernize and strengthen the landmark law, which was enacted to prevent redlining and ensure banks serve all segments of the communities where they operate, regardless of race or income. Among other things, the new rules would reflect the age of mobile and branchless banking, evaluating larger banks on how well they serve all segments in all areas where they do business, even if there isn’t a physical branch or ATM. 

“It has been 27 years since the government made a meaningful effort to keep Community Reinvestment Act rules up to date with the convulsions of technology, financial industry consolidation and other key changes to how Americans work and live,” said Jesse Van Tol,  CEO of the National Community Reinvestment Coalition, which promotes fair credit access for underserved communities. “We’ve seen how much harm such lags can do as economic chasms of race and class have persisted and even expanded.”

Under the CRA, the Federal Reserve, the Federal Deposit Insurance Corp., and the Office of the Comptroller of the Currency evaluate banks based on how well they meet the needs of the low-to-moderate income neighborhoods they serve, and take that rating into account when determining whether banks should be allowed to merge, acquire other banks, or open new branches. 

Regulators are accepting comments on the draft rules through Aug. 5, after which they will be finalized and go into effect.

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