April 5, 2025 / VOLUME NO. 360

CRA Revamp Dies, Again

In the history of U.S. banking regulations, perhaps nothing has been so hard to get over the finish line as a modernization of the Community Reinvestment Act. 

The law dates back to the 1970s and aims to ensure banks lend in low- and moderate-income neighborhoods. Banks are examined and scored based on their lending and commitments near their geographic locations. A low score can hinder strategic opportunities such as new branches or acquisitions. 

The rule banks use last changed in 1995. A lot has happened since then, including the development of the internet, mobile banking and banking as a service. As a result, more and more banks have branchless or branch-light footprints. 

That’s not to say regulators haven’t tried to modernize the CRA. In 2020, Comptroller of the Currency Joseph Otting pushed through a new set of rules for OCC-regulated banks, but the other banking regulators didn’t sign on, leading to different sets of rules.

Then, in the fall of 2023, regulators jointly issued a new 1,480-page final rule that critics decried as overly complex. Then-vice chairman of the Federal Deposit Insurance Corp., Travis Hill, called it “by far the longest rulemaking the FDIC has ever issued.” Federal Reserve Governor Michelle Bowman said 10% of banks would be rated “needs to improve” under the revised rule, an increase from 1%. 

The revisions, which were set to go into effect starting in 2026, created new assessment tests for banks above $2 billion in assets. They also sought to clarify which types of investments would garner credits and gave extra points for creating digital products that would improve financial inclusion. Industry groups sued to block the rule, and effective April 1, 2024, a Texas judge issued an injunction that delayed the rule’s implementation.

After the election of Donald Trump, everything changed. Hill became acting chairman of the FDIC, and Bowman was nominated as the Federal Reserve’s vice chair of supervision, an important position that sets rulemaking. 

Last week, under new leadership, the federal regulatory agencies issued a joint statement. It said the agencies plan to rescind the final rule and go back to the original rulemaking from 1995.

For the CRA, it’s back to square one.

• Naomi Snyder, editor-in-chief for Bank Director

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“In the past, fraudsters have been more thieves in the night. Now, they’re putting themselves in situations where we’re the most vulnerable and feel the most guarded, and they’re purporting to be the good guys.” — Liz Wolverton, Synovus Financial Corp.

• Laura Alix, director of research for Bank Director 

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