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WASHINGTON, July 20 (Reuters) – A leading U.S. bank regulator announced Tuesday it will propose rescinding a 2020 update to a fair lending rule, and instead will work with other regulators on establishing a joint rule.
The Office of the Comptroller of the Currency (OCC) said it was moving to scrap the previous update to the Community Reinvestment Act (CRA) rules, saying uniform action across regulators is preferred. In a joint statement, the OCC, Federal Reserve and Federal Deposit Insurance Corp (FDIC) said they were committed to a joint rule-writing effort to update requirements for the 1977 fair lending law.
The Fed, FDIC, and OCC share responsibility for enforcing the CRA, grading banks based on how well they provide support to lower-income communities. All three agencies have agreed the rules are in need of an update, as they were last changed in 1995.
The latest announcement formalized the long-expected move by the Biden administration to scrap the previous rulewriting effort, which had come under criticism from consumer advocates and banks alike for being rushed and disjointed.
Michael Hsu, the acting OCC chief, said in a statement the previous rule was a “false start.”
Under former chief Joseph Otting, a Republican, the agency pushed forward to singlehandedly update the rules despite grumbling from banks who were unhappy with the rulewriting.
The Trump administration said its 2020 update to the OCC rules was aimed at giving banks more clarity and flexibility in terms of what activities they could do to earn a passing grade with regulators. But some community groups and Democrats cautioned it could allow banks to provide less support for low-income communities while staying in regulators’ good graces.
“It is well past time for federal regulators to finally demonstrate responsible government by modernizing CRA for the first time in over two decades,” said Richard Hunt, president and CEO of the Consumer Bankers Association. (Reporting by Pete Schroeder; Editing by Leslie Adler and Aurora Ellis)