Skip to main content
U.S. flag
An official website of the United States government
Dot gov
The .gov means it’s official. 
Federal government websites often end in .gov or .mil. Before sharing sensitive information, make sure you’re on a federal government site.
Https
The site is secure. 
The https:// ensures that you are connecting to the official website and that any information you provide is encrypted and transmitted securely.
Federal Register Publications

FDIC Federal Register Citations



Home > Regulation & Examinations > Laws & Regulations > FDIC Federal Register Citations




FDIC Federal Register Citations

Chicago Community Loan Fund

From: Juli Miller
Sent: Friday, September 17, 2004 11:00 AM
To: Comments
Subject: Withdraw Proposal to Weaken CRA

September 17, 2004

Mr. Robert E. Feldman
Executive Secretary
ATTN: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 E. 17th Street, NW
Washington, DC 20429

RE: RIN 3064-AC50

Dear Mr. Feldman:

As a member of the National Community Capital Association (NCCA) and on
behalf of the Chicago Community Loan Fund (CCLF), I urge you to withdraw
your proposed changes to the Community Reinvestment Act (CRA) regulations.
CCLF is a nonprofit community development loan fund that has worked
extensively on community reinvestment regulation. Our mission is to
provide low-cost, flexible financing to nonprofit community development
organizations for affordable housing, economic development and social
service initiatives in low- and moderate-income neighborhoods throughout
the Chicago metropolitan area. To date, the fund has closed 100 loans
totaling over $14.8 million in financing, which in turn has leveraged
nearly $213 million in additional public- and private-sector capital for
those community projects. We feel this proposal threatens development in
the low- and moderate-income neighborhoods that we—and other nonprofit
loan funds like CCLF—serve. If enacted, the FDIC will define small banks
as $1 billion and less with those banks having assets between $250 million
and $1 billion subject to community development criteria.

Under current regulations, banks with assets of at least $250 million have
performance evaluations that review lending, investing, and services to
low- and moderate-income communities. You propose that state-chartered
banks with assets between $250 million and $1 billion follow a community
development criterion that allows banks to offer community development
loans, investments OR services will result in significantly fewer loans
and investments in low-income communities--the very communities that the
CRA was enacted to serve. Currently, mid-size banks must show activity in
all three areas of assessment. Under the proposed regulations, the banks
will now be able to pick the services convenient for them, regardless of
community needs.

Under the FDIC proposal to raise the “small bank” standard from $250
million to $1 billion, only 13 of 467 FDIC regulated banks in Illinois
would be subject to the full CRA Exam, including the investment and
services tests. The 467 banks in Illinois regulated by the FDIC have
combined assets of over $83.4 billion. Over ninety-seven percent of these
banks have assets under $1 billion. With this change, an additional $31.1
billion in banks assets would only be subject to a streamlined CRA Exam.
This combined with the already $33.1 billion in assets already subject to
a streamlined CRA Exam, results in over $66.6 billion—or 79.8%--in assets
of FDIC regulated Illinois banks not subject to the full CRA regulations.

The proposed regulation is in direct opposition to Congressional intent of
the law. In a letter signed by 30 U.S. Senators to the four regulatory
agencies regarding an earlier proposal (February 2004) to increase the
definition of “small bank” from $250 million to $500 million, the Senators
wrote, “This proposal dramatically weakens the effectiveness of CRA…We are
concerned that the proposed regulation would eliminate the responsibility
of many banks to invest in the communities they serve through programs
such as the Low Income Housing Tax Credit or provide critically needed
services such as low-cost bank accounts for low- and moderate-income
consumers.”

This proposal would remove 879 state-chartered banks with over $392
billion in assets from scrutiny. This will have harmful consequences for
low- and moderate-income communities. Without this examination, mid-size
banks will no longer have to make efforts to provide affordable banking
services or respond to the needs of these emerging domestic markets.

In addition, your proposal eliminates small business lending data
reporting for mid-size banks. Without data on lending to small businesses,
the public cannot hold mid-size banks accountable for responding to the
credit needs of small businesses. Since 95.7 percent of the banks you
regulate have less than $1 billion in assets, there will be no
accountability for the vast majority of state-chartered banks.

Your proposal is especially harmful in rural communities. The proposal
seeks to have community development activities in rural areas counted for
any group of individuals regardless of income. This could divert services
from low- and moderate-income communities in rural areas where the needs
are particularly great. Wyoming and Idaho would have NO banks with a CRA
impetus to both invest in and provide services to their communities.
Vermont, Alaska, and Montana would only have one bank each. Commenters
advocating for this change state that raising the limit to $1 billion
would have only a small effect on the amount of total industry assets
covered under the large bank tests. I think this would be very hard to
justify to the low-income communities in Idaho left without meaningful
services.

Instead of weakening the CRA, the FDIC should be doing more to protect our
communities. CRA covers only banks and does not differentiate between
stand-alone banks and banks that are part of large holding companies. All
financial services companies that receive direct or indirect taxpayer
support or subsidy should have to comply with the CRA. Small banks that
are part of large holding companies should have to conform to the CRA’s
standards that are more stringent.

CRA exams look at a bank’s performance in geographical areas where a bank
has branches and deposit-taking ATMs. In 1977, taking deposits was a
bank’s primary function. In 2004, banks no longer just accept deposits:
they market investments, sell insurance, issue securities and are rapidly
expanding into more profitable lines of business like electronic banking.
Defining CRA assessment areas based on deposits no longer makes sense.
Customer base should be the focus for CRA assessment. For instance, if a
Philadelphia bank has credit card customers in Oregon, it should have CRA
obligations there.

The regulators also must protect consumers from abusive lending. The
FDIC’s proposal completely ignores this issue. Predatory lending strips
billions in wealth from low-income consumers and communities in the U.S.
each year. Borrowers lose an estimated $9.1 billion annually due to
predatory mortgages; $3.4 billion from payday loans; and $3.5 billion in
other lending abuses, such as overdraft loans, excessive credit card debt,
and tax refund loans. Without a comprehensive standard, the CRA becomes
nearly meaningless. The regulation should contain a comprehensive,
enforceable provision to consider abusive practices, and assess CRA
compliance accordingly, and it must apply to ALL loans.

The impetus for the creation of the CRA was to encourage federally insured
financial institutions to meet the credit and banking needs of the
communities they serve, especially low- and moderate-income communities.
This proposal undermines the intent of CRA, and threatens to undo the
years of effort to bring unbanked consumers into the financial mainstream.
I urge you to remove this dangerous proposal from consideration.

Sincerely,

Juli Miller, Program Assistant, Chicago Community Loan Fund


Last Updated 09/17/2004 regs@fdic.gov

Last Updated: August 4, 2024