- Trump regulators are proposing an overhaul of the Community Reinvestment Act (CRA), claiming the rule has been used to fund activist groups.
- The Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation announced the proposed rule on Friday, aiming to refocus the CRA on lending and community development.
- Proposed changes could significantly impact low- and middle-income communities by altering how banks fulfill their CRA obligations.
- Comptroller Jonathan Gould stated that the CRA had become a burden on community banks and emphasized the need for reforms to prevent it from being used as a social credit score.
- Rep. Andy Barr criticized the CRA for being weaponized by activist groups, stating it has pressured financial institutions beyond its original intent.
- The CRA was enacted in 1977 to combat redlining, a discriminatory practice where banks would deny loans in low-income or minority neighborhoods.
- The proposed changes would reduce the number of banks required to fully comply with the CRA by 800 banks, affecting only 86 banks or about 3% of all institutions.
- The last major revision of the CRA's regulations occurred in 1995, with previous attempts to update the rules blocked by courts.
Financial regulators in the Trump administration have proposed an overhaul of the Community Reinvestment Act (CRA), a law originally enacted in 1977 to combat redlining. The proposed changes aim to refocus the CRA on lending to low- and middle-income communities, rather than funding activist groups.1236
The Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation announced the changes, which would reduce the number of banks required to fully comply with CRA regulations from 886 to just 86, or roughly 3% of all institutions. This shift would increase the definition of a small bank from $412 million to $1 billion in assets, allowing banks with $10 billion or less to have more flexible supervision.
Comptroller Jonathan Gould stated, “Today’s proposed reforms will help ensure the CRA is no longer used as a social credit score for banks, nor as a funding mechanism for activist NGO networks under the guise of community development.”4
Critics, including Rep. Andy Barr and Sen. Katie Britt, argue that the CRA has been weaponized by left-wing groups to pressure banks beyond its original intent. They welcome the proposed reforms as a return to the law’s focus on community investment.5
However, Jesse Van Tol, CEO of the National Community Reinvestment Coalition, expressed concern that these changes could discourage banks from making grants, particularly in rural areas, potentially harming community development efforts.
The proposed rules will undergo a 60-day comment period before finalization, allowing stakeholders to voice their opinions on the changes.
“The OCC and FDIC proposal would raise the small-bank threshold to $1 billion, remove 800 banks from partial CRA compliance and leave only 86 banks under full rules. A 60-day comment period now opens, with NCRC CEO Jesse Van Tol warning of significant drops in rural grant activity.”
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