July 14, 2022

Rulemaking Spells Significant Changes to Community Reinvestment Act

Qualifying Native American Community Development Activities Better Defined
Holland & Knight Native American Law Blog
Randolph A. DelFranco
Native American Law Blog

The Office of the Comptroller of the Currency (OCC), Board of Governors of the Federal Reserve System (Fed) and Federal Deposit Insurance Corp. (FDIC) (together, the Agencies) issued a nearly 700-page Notice of Proposed Rulemaking (NPR)1 on May 5, 2022, proposing revisions to regulations of the Agencies' Community Reinvestment Act (CRA). Congress passed the CRA in 1977 to encourage regulated financial institutions (banks) to help meet the credit needs of the local communities in which they are chartered by requiring an examination of banks' records of meeting the credit needs of their entire community, including low- and moderate-income (LMI) neighborhoods. The last major regulatory revisions were completed in 1995. Comments on the proposed rulemaking are due by Aug. 5, 2022.

The Agencies are soliciting comment on a proposal to modernize CRA regulations by clarifying what counts, updating where activity counts, measuring performance more objectively and making reporting more timely and transparent. The proposed rule is intended to encourage covered institutions2 to better serve their communities, including LMI neighborhoods by increasing lending, investment and services in areas that need it most.

Under current CRA regulations, a bank's activities that qualify for community development consideration fall into four general categories: affordable housing, community development services, economic development, and revitalization and stabilization. To qualify for consideration, an activity must have a primary purpose of community development.

Generally, activities with a primary purpose of community development would continue to receive full CRA credit under the Community Development Financing and Community Development Services tests. The proposed rule also would create more descriptive and expansive criteria for the type of activities that qualify for CRA credit and would include additional definitions to reflect an emphasis on activities that are responsive to community needs, especially the needs of LMI individuals and communities and rural and Native Land areas, as well as the needs of small businesses and small farms.

Importantly for Indian Country, the Agencies for the first time ever included an entire section defining Native Land Areas to include the following geographic areas: Indian country, land held in trust by the U.S. for Native Americans, state American Indian reservations, Alaska Native Villages, Hawaiian Home Lands, Alaska Native Village Statistical Areas, Oklahoma Tribal Statistical Areas, Tribal Designated Statistical Areas, American Indian Joint-Use Areas and state-designated Tribal Statistical Areas.

Identifying Community Development

The NPR intends to clearly define criteria that would better identify the types of activities that meet the community development activity definition, including 11 categories that establish specific eligibility standards for a broad range of community development activities. The Agencies spelled out the community development activities on Native Land Areas that would qualify banks for CRA credits, including investments in revitalization projects, essential community facilities and infrastructure, disaster preparedness, and climate resiliency.

To qualify banks for CRA credits in Native Land Areas the project must 1) benefit or serve residents, including LMI residents of Native Land Areas; 2) not displace or exclude any LMI residents; and 3) work in conjunction with a federal, state, local or tribal government plan, program or initiative that benefits or serves residents of Native Land Areas;.

Other community development activities, such as affordable housing or economic development, could also qualify for consideration in Native Land Areas, provided that they otherwise meet the eligibility standards for those particular activities.

Of further importance for Indian Country, the proposed changes clearly spell out that banks can receive CRA credits for partnering with and investing in U.S. Department of the Treasury-certified community development financial institutions (CDFI), as well as emerging CDFI. Under previous interpretations of CRA rules, banks had to invest within their service areas to qualify for CRA credits, which drastically limited the effectiveness of the program in Indian Country given its lack of banking services.

A comment-submission link and additional information on the NPR release are available on the Federal Reserve Board's website.


1 OCC, Fed and FDIC Joint Notice of Proposed Rulemaking.

2 The proposed rule would apply generally to all insured depository institutions regulated by the OCC and FDIC, including national banks, state-chartered banks that are not members of the Fed, and federal and state savings associations (banks). These banks conduct approximately 85 percent of all CRA activity across the country.

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