U.S. Rep. Maxine Waters (D-CA), as chairwoman of the U.S. House Financial Services Committee, is leading 76 Democrats in urging federal banking regulators to put an end to the practice of “modern day redlining” in their proposal to modernize the Community Reinvestment Act (CRA).
Redlining refers to a discriminatory practice that puts financial services, as well as other services, out of reach for residents of certain areas based on race or ethnicity. In a letter to the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation (FDIC), and Office of the Comptroller of the Currency (OCC), the Democrats said the regulators should carefully consider comments from civil rights and community groups in CRA modernization proposal.
“We are heartened by your agencies’ efforts to put forward a new proposal to modernize the CRA, which represents a once in a generation opportunity for federal bank regulators to end redlining and its present-day manifestations. The CRA became law in 1977 and the last time your agencies came together to reform CRA rules was in 1995, nearly three decades ago. Significant changes in the financial marketplace have taken place since that time…[m]any of those changes have contributed to less effective CRA rules,” wrote the lawmakers. “We appreciate your agencies’ joint efforts to work together to advance a much-needed update to CRA rules. As you work to finalize the rule, we urge you to consider our recommendations as well as those from civil rights groups, consumer advocates, and other affected stakeholders.”
Among their suggestions, they recommend that CRA exams take into account bank activities that impact communities of color as well as low-and-moderate income communities. They also say banks should only get CRA credit when they make meaningful investments in communities, and that CRA exams should become more rigorous.