NEW YORK (AP) – The Biden administration on Tuesday announced it would repeal changes the Trump administration made to a law aimed at preventing banks from discriminating against racial minorities and the poor.
The Office of the Comptroller of the Currency, one of the country’s banking regulators, said it plans to reconsider regulations drafted in 2020 governing a law known as the Community Reinvestment Act. Civil rights-era law requires banks to document the extent of their lending to the communities around their branches to ensure that they don’t just lend to wealthy or white customers.
The OCC has said it plans to start from scratch and has called on banks to effectively ignore the 2020 changes while the agency rewrites the regulations.
Trump’s Comptroller of the Currency Joseph Otting had made the review of the Community Reinvestment Act a cornerstone of his tenure. The law is widely respected by industry and activists, but both sides have agreed for years that it is outdated. Many banks now operate entirely online, ATMs are ubiquitous, and it is increasingly difficult to define what a “community” is to comply with the law.
While Otting has said he wants to modernize the law to reflect changes in the banking industry, his proposal was deemed too broad for many activists and for Democrats overseeing banks on the Senate Banking Committee and the Services Committee. House finances.
Senator Sherrod Brown, D-Ohio and chairman of the Senate Banking Committee, said in a statement that the OCC’s decision was “a step in the right direction.” He said the regulations were “stuck last year against the advice of civil rights leaders, community development activists and local voices.”
Under the CRA, banks must pass exams to show they are lending enough in their communities. Banks are required to obtain a passing score on the exam in order to open more branches or merge with other banks.
But among the changes to the law in 2020, banks were reportedly given credit for passing the exam by issuing credit cards and, in some circumstances, for loans they made to build or improve facilities such as sports stadiums and hospitals.
Campaigners argued that these changes would have made it easier for many banks to pass their CRA exams and would discourage them from opening branches or approving mortgages in low-income neighborhoods. Civil rights activists have long argued that the law is a powerful tool in getting banks to tackle systematic financial inequalities in this country. For example, CRA reviews are often a starting point for DOJ prosecutors when investigating potential cases of redlining.
âThe CRA was, and still is, a civil rights bill,â Representative Gregory Meeks, D-New York, said last year during a Congressional committee hearing reviewing the changes to Otting. “Your proposal would harm that.”
The changes proposed by Otting were so drastic that the other two banking regulators with authority under the law, the Federal Reserve and the Federal Deposit Insurance Corporation, refused to sign the OCC changes. This has left banks wondering which regulator to follow when it comes to compliance.
The Biden administration’s move is “encouraging news,” said Richard Hunt, CEO of the Consumer Bankers Association, an industry trade group for the nation’s largest retail banks. “We hope that regulators and politicians put politics aside and find common ground to better serve communities across the country.”
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