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October 24, 2023

The Community Reinvestment Act (CRA) Rule Finalized Today by the Federal Reserve, FDIC, and OCC Is Well-Intentioned But Unlikely To Work

WASHINGTON, D.C.— Dennis Kelleher, Co-Founder, President, and CEO, issued the following statement in connection with today’s release of the Federal Reserve (“Fed”) and FDIC’s release of the Community Reinvestment Act (“CRA”) final rule:

“The final CRA rule released today by the Fed and FDIC is well-intentioned but is not likely to work.  It will likely continue to miss classic cases of redlining and enable banks to continue getting high if not perfect CRA ratings while continuing to reduce lending to low- and moderate-income (“LMI”) communities. It will also virtually guarantee that banks’ CRA examination scores will continue to be baselessly inflated as has been the case for years, to the detriment of the LMI communities the CRA is meant to serve.

“The CRA is intended to provide LMI families and communities with fair and equal credit, investment, and banking services. However, the final rule ignores a robust data analysis that reveals egregious blind spots and provisions that will artificially inflate banks scores without any benefit to LMI communities. Applying the new rule to historical data shows that the vast majority of banks would still receive passing scores, despite the historical record of declining homeownership in LMI communities. The rule also focuses on lending by banks at a point in time relative to other lenders in a geographic area, rather than assessing lending over time.  Additionally, the new rule will also allow banks to continue to cherry-pick certain areas of counties to lend or not lend to get the best CRA score.

“Low- and moderate-income families and communities have been illegally denied credit, investment, and banking services for many decades.  That has directly contributed to the ongoing intergenerational wealth gaps and poverty. The CRA was supposed to change that but has not.  We hope the agencies’ rhetoric when finalizing the rule today becomes a reality not just for future bank CRA ratings but also for the people who live in low- and moderate-income communities.”

The data analysis can be found in this CRA Policy Brief here and supplemental comment letter here.


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