OCC Finalizes Community Reinvestment Act Changes

Thoughtware Alert May 27, 2020
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On May 20, 2020, the Office of the Comptroller of the Currency (OCC), without the FDIC or Federal Reserve, finalized changes to the implementing regulations of the Community Reinvestment Act (CRA) with the goal of making the CRA framework “more objective, transparent, consistent in application, and reflective of changes in banking.” The new rule aims to strengthen and modernize the CRA framework in four key areas:

Qualifying Activities – Due to prior inconsistencies in interpretations of what activities qualified for CRA consideration, the OCC has provided criteria on qualifying activities for CRA purposes. A nonexhaustive list of activities qualifying for CRA consideration is available on the OCC website.

Assessment Areas – Historically, the CRA has emphasized branch location when determining where CRA activities are considered. While branch location is still a focus when determining assessment areas, the final rule modifies the CRA framework to equalize “treatment between traditional branch-based banks and banks that gather deposits through the Internet and other non-branch-based channels.”

Measuring Performance – To provide a consistent and objective measurement of CRA-qualifying activity, the new rule provides an evaluation method that considers both “the distribution of retail lending activities relative to LMI populations and LMI census tracts” and “all CRA activity, measured in dollars.”

Reporting – The new framework will provide objective and transparent standards for CRA evaluations to help facilitate more useful and timely performance evaluations. The OCC states that focusing on objective and transparent standards will “ensure that ratings are more accurate reflections of the level of CRA activity being conducted.” 

These changes apply only to OCC-regulated institutions. The changes are effective October 1, 2020, with a compliance date of January 1, 2023. Small and intermediate banks will have until January 1, 2024, to comply with the assessment area, data collection and record-keeping requirements of the new rule. The final rule is available on the OCC’s website.

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