ABA seeks changes to ARC modernization proposal in statement for record

Ahead of a House Financial Services Subcommittee hearing on the joint agency proposal to update the Community Reinvestment Act, the American Bankers Association warned lawmakers that certain aspects of the proposal are unlikely to achieve the goals of regulatory modernization, and that “if not calibrated appropriately, the final rule could achieve results contrary to the intent of the agencies, particularly with respect to expanding access to credit for residential mortgages, small business loans and community development finance.

The ABA called on the agencies to rethink an aspect of the proposal that would require large banks (which the proposal defines as those with more than $2 billion in assets) to delineate the creation of individuals” where the bank has concentrations of home mortgages or small business loans where it has no physical presence. Among other things, the ABA noted that the lending volumes that would trigger an RLAA are “not large enough” and could inadvertently cause banks to “reduce retail lending in locations that are incidental to the company’s business strategy. bank and where the bank does not actively market its loan products.

The association further recommended that regulators rethink the proposed benchmarks and rating methodology; allow for an adequate transition period once the rule is finalized; and allow more time for industry to provide comments on the proposal. The ABA also pointed out that credit unions and other non-bank financial companies should be subject to similar requirements as the CRA.

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