The Biden administration announced Tuesday it would repeal the changes made by the Trump administration to an important law made to stop banks from discriminating against racial minorities and the poor.
The Office of the Comptroller of the Currency, one of the nation’s bank regulators, said it plans to reconsider the regulations it wrote in 2020 governing a law known as the Community Reinvestment Act. The Civil Rights Era law requires banks to document how well they are lending to the communities that surround their branches, in an effort to make sure that banks are not just lending to the wealthy or to white customers.
The OCC said it plans to start from scratch, and told banks to effectively ignore the 2020 changes while the agency rewrites the regulations.
Trump’s Comptroller of the Currency, Joseph Otting, had made revising the Community Reinvestment Act a cornerstone of his tenure. The law is widely respected by the industry and activists alike, but both sides have agreed for years that law was out of date. Many banks now operate entirely online, ATMs are ubiquitous, and it was increasingly more difficult to define what a “community” was in order to comply with the law.
But the changes the OCC made last year were considered too broad for many activists and for Congressional Democrats who oversee banks on the Senate Banking Committee and House Financial Services Committee. For example, banks would have been given credit under the law for issuing credit cards and personal loans—something banks were already doing, particularly the largest institutions.
The regulations would have also given banks credit, under certain circumstances, for loans they make to build or improve facilities such as sports stadiums and hospitals.
The argument from activists was that the changes would have made it easier for many banks to pass their CRA exams, and would disincentivize them from opening branches or approving mortgages in low income neighborhoods.
“CRA was, and still is, a civil rights bill,” said Black Rep. Gregory Meeks, D-New York, last year at a Congressional committee to review Otting’s changes. “Your proposal would undermine that.”
The changes proposed by Otting were so drastic that the other two bank regulators that have authority under the law, the Federal Reserve and the Federal Deposit Insurance Corporation, refused to sign on. This left banks wondering which regulator to follow when it came to compliance.
