Trump Administration Seems Likely to Weaken CRA Rules

by Jeff Sovern

The WSJ has an interesting story out, Trump Administration Seeks to Change Rules on Bank Lending to the Poor, that reports:

Community groups say the law should be expanded in order to bring opportunity to more low-income areas, while banks say they would do a better job of helping these people if the law became more flexible and less bureaucratic.

“Community groups don’t like the way CRA is today, the banks don’t like the way CRA is today, and regulators don’t like it,” said Comptroller of the Currency Joseph Otting, whose agency is also planning changes to the way it regulates banks’ compliance with the law. “I have a very strong viewpoint of how to fix this.”

So you might think that Otting's fix will involve both something for community groups and something for banks. Well, maybe, maybe not. The article also explains the changes "could make it easier for banks to meet certain lending requirements and lower penalties for compliance problems." We don't know what the changes will be, but already some alterations have been made. As an example, the article notes:

During the Obama administration, officials penalized banks’ CRA grades for a wide range of alleged misconduct, including issues with overdraft charges and allegedly discriminatory auto loans made by car dealers.

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In October, Mr. Otting’s predecessor Keith Noreika, a Trump administration appointee, changed OCC policies to make it much harder for banks to be downgraded for these reasons not directly tied to CRA lending.

It would be great if the changes provided greater consumer protection, but I will believe it when I see it. The article also discusses the possibility of including as "community development" loans transactions that don't solely help the poor and are for small businesses.

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