By: Krishna Pathak

The Federal Reserve announced plans to revamp the Community Reinvestment Act (CRA) on September 21, 2020.[1] The CRA, best known for its anti-redlining provisions, was enacted in 1977 as a safeguard against unfair lending practices in low-income and moderate-income communities.[2] Under the CRA, banks are subject to performance evaluations form the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), and the Federal Reserve Board (Fed).[3] Each regulator evaluates banks’ lending practices as a way to address inequities in access to credit and financial services caused by structural racism; the “grade” could impact a bank’s growth by limiting bank mergers and branch expansion.[4]  Regulators have made efforts to overhaul the CRA by updating it to account for online banking, since the last revision was during the Clinton Administration.[5]

The OCC, which holds the largest CRA portfolio, adopted a final rule that the Fed and the FDIC did not join.[6] The OCC’s rule includes a score of a bank’s overall community lending by focusing on dollar volume of the activity, rather than relying on specific branches, like the FDIC and Fed.[7] This rule has been met with criticism, efforts to repeal the rule from Democratic legislators, and a lawsuit.[8]  

Fed Governor and the last of the Obama-era appointees, Lael Brainard, highlighted the need for the overhaul due to the COVID-19 pandemic and increased attention to long-existing racial disparities.[9]  The Fed’s Advance Notice of Proposed Rulemaking (ANPR) aims to implement two tests: the Retail Test, with subtests on Lending and Services, and the Community Development Test, with subtests on Financing and Services.[10]  The goal of the separate tests is to tailor metrics to local market conditions, bank size, and business model, and to look at financing quantitatively and services qualitatively.[11] Additionally, the ANPR provides small rural banks with more flexibility in tailoring the assessment area definition to better account for the areas where they have a physical presence.[12]

While Fed Chairman Jerome Powell stated that the ANPR is a step in “laying a foundation for the agencies to build a shared, modernized CRA framework,” the OCC and the Fed’s metrics could subject lenders to different standards.[13] The OCC is leaning toward a single, objective metric based on a bank’s overall lending activities, while the Fed is planning to employ the Retail Test and its subtests for some banks and the Community Development Test and its subtests for others.[14] While officials claim there is “significant” consensus between the agencies and the ANPR and the OCC’s final rule reflect some agreement, it is unclear whether or how the agencies might amend their rules to closely match each other. [15] In the case that the agencies do not reach an agreement, banks that are regulated by multiple agencies will face disarray in complying with multiple rules and could spend millions to deal with compliance costs.[16]

The review of the CRA is timely because changing banking practices will help to alleviate some of the economic impacts of COVID-19, update metrics to account for modern improvements like online banking, and provide low-income communities with much needed capital. However, much uncertainty remains for banks looking to comply with opposing metrics. The recent economic downturn has highlighted how institutions like the Fed can “fill holes in the economy” that have historically and systematically disadvantaged black and brown communities and communities of color.[17]

[1] Press Release, Fed. Rsrv. Bd., Federal Reserve Board issues Advance Notice of Proposed Rulemaking on an approach to modernize regulations that implement the Community Reinvestment Act (Sept. 21, 2020),

[2] Morgan O. Schick, Modernization or A Missed Opportunity? The Comptroller of the Currency Updates the Community Reinvestment Act, 23 N.C. Banking Inst. 485 (2019).

[3] Id.

[4] See Rachel Siegel, Fed Aims to Revamp Laws Ensuring Access to Credit for Low and Moderate Income Families, Wash. Post. (Sept. 21, 2020, 10:02 AM),; Evan Weinberger & Jesse Hamilton, Fed Overhaul of Anti-Redlining Rules Focuses on Loan Output, Bloomberg (Sept. 21, 2020; 1:24 PM),

[5] See Siegel, supra note 4; see also Weinberger & Hamilton, supra note 4.

[6] See Weinberger & Hamilton, supra note 4 (discussing how former OCC chief aimed to “revamp” the CRA during his tenure and exited the agency after the rewrite ended).

[7]  See Community Reinvestment Act Regulations, 85 Fed. Reg. 34,734 (to be codified at 12 C.F.R. pt. 25,195).

[8] Jon Hill, Fed Plots Course for Revamping Community Lending Rules, Law 360 (Sept. 21, 2020, 10:30 AM), (stating that critics of the OCC’s rule “argued it could worsen credit deserts, diminish banks’ incentives to maintain a presence in underserved neighborhoods, and encourage a shift toward higher-dollar, lower-volume activity”). 

[9] Id. (discussing Brainard’s remarks on how CRA can be a “strong and effective tool” to address long-standing systemic inequities such as access to credit and the racial-wealth gap).

[10] Advanced Notice of Proposed Rulemaking, Bd. of Governors of the Fed. Rsrv. Sys., (last visited Sept. 21, 2020) (separating the retail and community development tests to better evaluate the services provided by banks and to better tailor metrics to the market where the bank operates).

[11] Id. at 5-6; see Siegel, supra note 4 (discussing Brainard’s comments on how the ANPR can clarify banks’ credits and ratings); Hill, supra note 8 (explaining how Retail and Community Development subtests evaluate banks both qualitatively and quantitatively and how smaller banks can opt out of the new metrics).

[12] Fact Sheet on the Community Reinvestment Act Advance Notice of Proposed Rulemaking, Bd. of Governors of the Fed. Rsrv. Sys., (last visited Sept. 21, 2020).

[13] See Press Release, Fed. Rsrv. Bd., Statement by Chair Jerome H. Powell (Sept. 21, 2020),; see also Weinberger & Hamilton, supra note 4.

[14] See Advanced Notice on Proposed Rulemaking, supra note 10, at 5-6 (discussing the evaluation metrics, including the Retail Test the Community Development Tests).

[15] See Hill, supra note 8.

[16] See Emily Flitter & Jeanna Smialek, Bank Regulator’s Battle with Anti-Redlining Law Comes to an End, N.Y. Times (May 28, 2020),

[17] See Siegel, supra note 4 (explaining how reexamining the CRA could better address lack of access to capital in communities of color and help build “a more fair economy”).

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