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FDIC Federal Register Citations



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FDIC Federal Register Citations



SARGENT SHRIVER NATIONAL CENTER ON POVERTY LAW

September 13, 2004

Mr. Robert E. Feldman
Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 17th St. NW 20429

RE: RIN 3064-AC50

Dear Mr. Feldman:

On behalf of the Sargent Shriver National Center on Poverty Law (Shriver Center), and as a member of the National Community Reinvestment Coalition, Financial Links for Low-Income People coalition, and Chicago CRA Coalition, I urge you to withdraw the proposed Community Reinvestment Act (CRA) regulations that would eliminate the investment and service parts of the CRA exam and the small business lending data reporting requirement for state-charted banks with assets between $250 million and $1 billion.

The Shriver Center is a Chicago-based nonprofit organization that takes action to end poverty through law reform, public policy, and communications strategies in the areas of welfare reform, workforce development, affordable housing, and community development. The Shriver Center's community investment unit coordinates FLLIP, a statewide coalition of Illinois nonprofit organizations, community groups, Individual Development Account providers, adult educators, government agencies, financial institutions, and regulators, FLLIP is dedicated to expanding financial education and asset-building opportunities for low-income people. The Shriver Center and FLLIP recently partnered with the Illinois Department of Human Services to implement a highly successful financial education and Individual Development Account (IDA) program for low-income adults. The Shriver Center also participates in the national SEED Policy & Practice Initiative, a children's saving program.

Nationally, your proposal would make 879 state-chartered banks with over $392 billion in assets eligible for the watered-down CRA exam. In total, 95.7 percent or more than 5,000 of the state-charted banks your agency regulates have less than $1 billion in assets. These 5,000 banks have combined assets of more than $754 billion. Your proposal will drastically reduce, by hundreds of billions of dollars, the bank assets available nationally for community development lending, investment, and services.

In Illinois, over 97 percent of all banks in the state would be subject to the watered-down CRA exam. The proposed change would affect 70 banks in Illinois, including several banks that have contributed to the FLLIP coalition's programs (Allstate Bank, Itasca Bank & Trust, and Lisle Savings Bank). Those banks provided grants ranging from $1000 to $25,000 and totaling almost $30.000. The grants were used for activities including: community-based free financial education classes; matching funds for Individual Development Accounts (IDAs) to help low-income workers buy a house, start a business, go to college, or buy a car; and scholarships for financial education train-the-trainer sessions for nonprofit staff.

With fewer government and foundation resources available, nonprofit financial education program providers and IDA program providers rely on our bank partners for grants, in-kind donations, marketing and training assistance, and access to convenient branches and affordable products and services. We believe that the proposed rule would result in Illinois nonprofits receiving fewer grants and resources for these needed programs.

Banks frequently cite both CRA and business opportunities as factors in their support financial education and asset-building programs. An evaluation of the FLLIP program by the University of Illinois documented that the program helped graduates increase financial literacy, budget better, save more, open bank accounts, make investments, and decrease use of check cashers and payday loans. Thus, a decrease in support for financial education and asset-building programs for low-income people would result in banks missing opportunities to gain new customers and deposits.

The elimination of the service test would also have harmful consequences for low- and moderate-income communities that lack mainstream banking centers and affordable financial services. CRA examiners would no longer expect mid-size banks to maintain the 7,860 branches affected by this proposed rule or build needed branches in low- and moderate-income communities. Mid-size banks would have less incentive to offer low-income consumers affordable checking and savings accounts and other banking services, such as remittances used by immigrants to send money home.

In place of the investment and service parts of the CRA exam, the FDIC proposes to add a community development criterion under which mid-size banks would have to engage in only one of three activities: community development loans, investments, or services. In addition, you propose to allow banks to receive CRA credit for activities in rural areas that arc not targeted to the low- and moderate-income populations that CRA was intended to help. These proposed changes, too, would result in fewer banks and fewer resources supporting financial education and asset-building programs for low-income people.

Your proposal will also decrease access to credit for small businesses, which is directly contrary to CRA's goals. Elimination of the requirement that mid-size banks report small business lending data by census tracts or revenue size of the small business borrowers will hamper efforts to hold mid-size banks accountable for responding to the credit needs of minority-owned, women-owned, and other small businesses. Data disclosure has been responsible for increasing access to credit precisely because disclosure holds banks accountable.

For these reasons, the Shriver Center opposes the proposed changes to CRA and asks that you withdraw the proposed rule.

Sincerely,
Dory Rand
Supervising Attorney, Community Investment & FLLIP Coordinator


Last Updated 09/16/2004 regs@fdic.gov

Last Updated: August 4, 2024