Milbank Financial Institutions Regulatory partner Douglas Landy was recently quoted in the Compliance Week article “Treasury Looks to Bring CRA into the Future of Modern Banking.” The Community Reinvestment Act, or CRA, was enacted by Congress 40 years ago to ensure fair lending practices while meeting the credit and deposit needs of low-income and moderate-income banking customers, but little has changed since then. Meanwhile, there has been an evolution of banking services, including technology and mobile banking, and the growth of FinTech firms. The Treasury Department released recommendations in April to the primary CRA regulators, the Office of the Comptroller of the Currency, the Federal Reserve Board, and the Federal Deposit Insurance Corporation, in an attempt to modernize the CRA. Mr. Landy comments, “All the regulators have been very open about wanting to reexplore the CRA,” while explaining, “it is a tricky rule in the sense that, to really change it, one would need Congress to say something like, ‘OK, let’s expand it to all credit providers, like insurance companies and asset managers because it is too narrowly focused on banks.’ That seems unlikely.” However, Mr. Landy thinks that aside from a radical overhaul there is still “a lot that could be done, because the CRA is notoriously difficult to comply with” and that, “There are a lot of ways to make it clearer.” Looking forward, he notes that, “As time goes on, there will be types of financial products that act as loans but are not traditional loans and it is always unclear whether those count for credits under CRA.”
