Feds Wrap Up Overhaul of Community Reinvestment Act and Give Banks More Time to Comply

Randy Benjenk’s commentary was included in a MarketWatch article analyzing an update by federal bank regulators to the 1977 Community Reinvestment Act (CRA). Randy offers his expertise to comment on how these updates will present challenges and additional costs to lenders.

“What started out as an exercise of attempting to update the CRA to make it more transparent has turned into a sprawling new regulatory regime. Banks are now going to need to keep track of — and perform well on — metrics that they haven’t in the past, including how well they’re reaching low- and moderate-income people through mobile-banking applications outside of areas where banks have physical branches,” Randy said.

He added that “in the past, if a bank knew its performance was lacking, it would turn to community lending officers who know how to market in a neighborhood and talk to people and find the right community-development institutions to partner with. If a bank is being evaluated where it doesn’t have people on the ground, it will be a challenge to improve the numbers," he said.

Randy also commented on how the new rules could create a competitive dynamic where banks in major metropolitan markets are plowing resources into pursuing the same group of creditworthy low- and moderate-income people: “Banks could reduce their lending outside their physical footprint so they don’t get tested in those places. This could make lack of available credit worse in [some] areas. Banks at the lower end of the $2 billion cutoff for the CRA rule to apply will have fewer resources to deploy than larger banks,” Randy said.