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Federal Register Publications

FDIC Federal Register Citations



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FDIC Federal Register Citations

Coalition of Community Development Financial Institutions

September 17, 2004

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

RE: RIN 3064-AC50

Dear Mr. Feldman:

The Coalition of Community Development Financial Institutions (CDFI) is a national organization representing the concerns and interests of CDFIs. The newly proposed regulations concerning the Community Reinvestment Act (CRA) would adversely affect the mission and goals of our nationwide network of almost 1000 CDFIs. The CDFI Coalition opposes the adoption of the proposed CRA regulations on the grounds that the changes would hinder growth and expansion of financial services and accessibility to capital in low and moderate-income communities.

The change in the community development test criterion, the increase in the asset limit of a small bank, and the new definition of community development activities in rural areas all serve to diminish the effectiveness of the CRA for the CDFI industry and the communities CDFIs serve.

The CDFI Coalition opposes the change in the community development test criterion for banks with assets between $250 million and $1billion from requiring community development lending, investment, and services to an optional choice of one of the three. The proposed change will diminish the occurrence of all three criteria included in the community development test. The ramifications of removing the required lending and investment tests could lead to a dramatic reduction in the building of affordable housing, investment in the Low Income Housing Tax Credit, community health clinics, community centers, and economic development projects, all critical to community development. Furthermore, the relaxation of the lending test will remove the requirement of collecting and reporting lending information relating to small businesses by census tract and revenue size, mortgage lending, small farm finance, and consumer borrowing, making an examination of community coverage impossible.

The removal of the service test will severely retard the growth of access to financial services to low and moderate-income consumers. Low and moderate-income consumers rely on the CRA to a great extent to ensure bank branches are located in areas far from population centers with higher income consumers. Low and moderate-income Americans are already at a great disadvantage compared to higher income consumers when accessing financial services; this change will only exacerbate the disparity.

The increase in the asset definition of a small bank to quadruple the current $250 million dollar limit to $1 billion dollars will further erode the effectiveness of the CRA in serving low and moderate-income communities. The increased asset definition of a small bank will dramatically increase the number of state-chartered banks (879) not subject to a comprehensive CRA exam. The less stringent examination will allow these newly defined small banks to relax compliance activities to meet the CRA examination thus reducing CRA’s effectiveness of meeting the financial needs of low and moderate-income communities.

Lastly, the expansion of the definition of community development to include all individuals in rural areas contradicts the expressed original intent of the CRA to have a continuing obligation to serve the credit and deposit service needs of their local communities, including low and moderate-income areas. To extend the definition of rural community development to all individuals in rural areas could lead to the loss of coverage for low and moderate-income communities in rural America to serve only the most profitable higher income rural communities.

All three proposed regulatory changes to CRA will adversely impact the original statutory intent of a law that has been successful in expanding access to capital and financial services to every community across the United States. Your actions on this matter are of great concern to CDFIs across the country and I strongly urge the FDIC not to adopt the proposed changes.


Sincerely,

Jennifer A. Vasiloff
Executive Director

 

Last Updated 09/28/2004 regs@fdic.gov

Last Updated: August 4, 2024