Nessel joins coalition in supporting Federal Reserve proposal to strengthen Community Reinvestment Act

Michigan Attorney General Attorney General Dana Nessel recently joined a coalition of 23 attorneys general in support of the Federal Reserve Board of Governors’ efforts to strengthen regulations under the Community Reinvestment Act (CRA). The CRA was enacted to help prevent racially discriminatory redlining in housing and encourage banks and depository institutions to meet the credit needs of all segments of their communities—including low- and moderate-income neighborhoods and individuals.

“Ensuring equal opportunity when it comes to housing should be common-sense and the CRA exists for that reason.  But we have to ensure that regulations are as strong as possible to put an end to discriminatory practices that the CRA was intended to address,” said Nessel. “My colleagues and I have submitted with our comments a number of recommendations that, if adopted, would further the core purpose of the CRA and help address racial and systemic inequities, incentivize banks to serve the housing needs of insecure communities, encourage affordable housing investments, and support small and minority-owned businesses.” 

Since the CRA was enacted in 1977, it has helped direct trillions of dollars in investments back to low- and moderate-income communities, increasing access to financial services and loans that incentivize the availability of affordable housing and support small businesses across the country. During the current economic and public health crisis, safeguarding and strengthening the law’s mechanisms to tackle persistent, structural inequality is as important as ever.

Compliance with the CRA is overseen by three regulatory agencies: The Federal Reserve Board of Governors, the Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corporation (FDIC). On Sept. 21, 2020, the Federal Reserve — following rulemaking by the OCC that was strongly condemned by a multistate coalition of attorneys general as antithetical to the goals of the CRA — put out a request for comments on its separate, independent proposal to strengthen, clarify and tailor CRA regulations to reflect the current banking landscape and better meet the core purpose of the law.

In their comment letter, the attorneys general applaud the Federal Reserve Board of Governors’ efforts and reemphasize the CRA’s critical impacts, including:

• Creating incentives for affordable housing and preventing homelessness: The proposal takes steps to incentivize housing for very low-income, homeless or other hard-to-serve populations as being particularly responsive for CRA evaluations.

• Serving financial needs of low- and moderate-income communities: The proposal is expected to keep banks accountable and responsive through community input in the evaluation process of bank activities under the CRA.

• Creating potential for increasing access to credit and deposit services for small businesses hit hard by the pandemic: The proposal tightens the definition of small businesses and farms in order to help better meet the credit and banking needs of residents who may have struggled to obtain relief.