OCC Won't Halt Community Lending Overhaul For Pandemic

By Jon Hill
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Law360 (April 9, 2020, 10:42 PM EDT) -- The head of the Office of the Comptroller of the Currency indicated Thursday that his agency will push ahead through the coronavirus pandemic to finalize draft revisions to regulations requiring banks to lend in lower-income communities, bucking calls from lawmakers and community groups to hold off for the time being.

In a statement, Comptroller Joseph Otting said his agency is aiming to release a completed set of Community Reinvestment Act rule changes within the next three months, explaining that he sees the COVID-19 crisis as having underscored the need to finish a proposed overhaul first advanced by the OCC and Federal Deposit Insurance Corp. late last year.

"It is our intention to craft a final rule that will encourage banks to lend and invest more in the communities they serve, including low- and moderate-income neighborhoods," Otting said. "We will work toward issuing a final rule during the first half of this year. Further delay would only prevent these valuable resources from reaching those who need them most in this time of national emergency."

Otting's statement came the day after the close of the comment period for the OCC and FDIC's proposal, which seeks to make the first major updates in more than two decades to the rules implementing the CRA, a 1977 law intended to combat discrimination in lending and promote equal access to credit.

Among other things, the proposal calls for revising how banks' compliance with the law is graded, broadening the range of banking activities that qualify for compliance credit and expanding the locations where banks can get credit for those conducting those activities.

Democrats and community advocates have argued that these changes would make it too easy for banks to pass their CRA compliance exams and would encourage them to shift away from making the kinds of home and small-business loans that benefit communities most. They've also raised process objections to the way the rulemaking has been handled.

But getting these changes finalized has been a top priority for Otting, who said Thursday that the proposal generated more than 7,400 comments that he and his fellow regulators will now be reviewing and "will consider carefully in developing a final rule."

Given this volume of feedback to wade through and the ongoing upheaval of the COVID-19 crisis, Otting's timetable for issuing a final rule could prove a challenge for the OCC and FDIC to meet. An FDIC spokesman declined Thursday to comment on Otting's statement but stressed the agency is now just focused on reviewing the proposal feedback.

Democratic lawmakers, state officials and community groups have also pointed to the pandemic as reason to postpone further work on the CRA overhaul, pushing unsuccessfully for an extension of the comment period and arguing that the regulators' attention needs to be elsewhere right now.  

"Your agencies should be prioritizing a strong response to the coronavirus pandemic, and, accordingly, we urge you to delay any unrelated rulemakings, including the [proposal] that would significantly undermine the CRA in its current form," House Financial Services Chairwoman Maxine Waters, D-Calif., and other Democrats on the committee wrote in a Tuesday letter to the OCC and FDIC.

Even some industry groups that have supported overhauling the CRA regulations have counseled a slowdown. In a comment letter on Wednesday, for example, the Consumer Bankers Association cited the coronavirus pandemic in arguing that the regulators shouldn't rush to finalize their plans and said it "simply is not an appropriate time to implement a new CRA regime" anyway.

"The unprecedented outbreak of COVID-19 already has greatly affected the communities we serve and will continue to impact communities for years to come," the group wrote. "We urge the issuing agencies to take all the time necessary to fully consider the impacts of this emergency and others, particularly to [low- and moderate-income] communities, before moving forward with the rulemaking process."

But in his statement on Thursday, Otting expressed determination to keep making progress with the OCC and FDIC's proposal, which he said contemplates changes that would require banks regulated by his agency to provide up to $1 trillion in qualifying loans and investments to earn the highest grades on their CRA exams.

"Over the last month, as the nation has managed its response to COVID-19, it has become even clearer to me that communities need more access to lending, capital, and services during this difficult time," Otting said.

--Editing by Emily Kokoll.

For a reprint of this article, please contact reprints@law360.com.

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