Financial Institution Regulators Address Financial Inclusion, Expansion of Access to Credit, and Further Consumer Protection from Discrimination

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Since early June 2020 when cries for racial justice resulted in a period of social unrest in the U.S., federal and state financial institution regulators have taken meaningful, proactive steps to acknowledge financial inequality issues, reach out to traditionally underserved populations to expand access to credit, and further protect consumers from discrimination. While it remains to be seen whether these initiatives will be effective and produce lasting results, they represent a significant, concerted effort by financial services regulators to promote greater financial inclusion and equality. This blog post contains a summary of those efforts.

FFIEC: On June 5, 2020, the members of the FFIEC (FDIC, OCC, Federal Reserve Board (“FRB”), CFPB, NCUA and the State Liaison Committee) issued an unprecedented statement on the importance of financial inclusion. Albeit brief, the statement underscored the federal and state regulators’ commitment to eradicating racism and discrimination in financial services. The regulators also stated they remain “steadfastly dedicated to ensuring that…financial institutions…provide fair access and fair treatment to everyone in America.”

CFPB: On July 10, 2020, the CFPB issued a request for information (“RFI”) on the Equal Credit Opportunity Act (“ECOA”) and Regulation B seeking public comment on how to expand access to credit and ensure that consumers are protected from discrimination in all aspects of credit transactions. The RFI contains a list of 10 topics on which the Bureau seeks public comment on whether it should provide additional clarity or guidance. CFPB Director Kathleen Kraninger concurrently issued a related blog post explaining that the Bureau seeks to play a leading role in the national conversation about racial inequality by taking action concerning fair treatment and equitable access to credit. Toward that goal, the CFPB is “taking steps to help create real and sustainable changes in our financial system so that African Americans and other minorities have equal opportunities to build wealth and close the economic divide.” According to Director Kraninger, issuance of the RFI – with the objective of establishing clear standards to help minorities – is the first step in that effort. The initial RFI was published for a 60-day comment period, which the Bureau just extended for another 60 days to December 1, 2020 to allow sufficient time for all interested stakeholders to comment. A link to our prior blog post about these developments is available here.

OCC: The OCC announced Project REACh on July 10, 2020 to promote greater access to capital and credit for underserved populations through policy and structural issues at the national and local level. REACh, which stands for Roundtable for Economic Access and Change, brings together leaders from the banking industry, national consumer advocacy and civil rights organizations, business, and technology to identify and reduce barriers that prevent full, equal, and fair participation in the nation’s economy. Founding members include the heads of the National Urban League, NAACP, Latino, Asian American, and Native American groups, top executives from JPMorgan Chase Bank, Citibank, and Wells Fargo, as well as leaders from minority-owned banks. The OCC hosted the first roundtable meeting on July 10 to begin identifying the projects the group will tackle, and three broad areas were identified: (i) promoting full and fair economic participation by reducing the number of “credit invisibles” in the U.S. (i.e., consumers without a credit score); (ii) increasing the inventory of affordable and sustainable housing, and (iii) enhancing the future of minority-owned depository institutions.

OCC and HUD: On July 17, 2020 at the Access to Capital Forum, OCC Acting Comptroller Brian Brooks and HUD Secretary Ben Carson and Senator Tim Scott (R-SC) – a member of the Senate Banking Committee and a leader for social justice – unveiled a new initiative to make affordable housing and capital more available to underserved communities through investments and lending related to Opportunity Zones. Lending and investments may receive credit under the OCC’s new CRA rules if such activities occur in Opportunity Zones that overlap with low- and moderate-income (“LMI”) areas and serve LMI populations. During his speech, Acting Comptroller Brooks highlighted important synergies among the OCC’s CRA final rule, Project REACh and the new initiative. Representatives from TD Bank, PNC and other banks also shared success stories of how Opportunity Zones and CRA investments helped promote the vitality of their communities.

FDIC: The FDIC’s efforts to address issues of economic inequality have focused on the role of minority-owned banks (known as Minority Depository Institutions (“MDIs”)) to ensure that they survive and continue to prosper.

  • On June 11, 2020, the FDIC issued its annual report to Congress on “Preservation and Promotion of Minority Depository Institutions,” as required by Section 367 of the Dodd-Frank Act. The report notes that as of December 31, 2019, there were 144 FDIC-insured MDIs with combined total assets of nearly $249 billion and 36,676 employees. The report touted the FDIC’s accomplishments during 2019, which included (i) issuance of a research study on demographics, structural change, geography, financial performance, and social impact of MDIs over a 17-year period; (ii) holding three roundtable discussions among MDIs and large bank executives to facilitate greater lending and community development activities in LMI areas; and (iii) establishment of a new MDI Subcommittee of the Advisory Committee on Community Banking.
  • On July 23, 2020, the FDIC released a podcast entitled “The Role of Minority Banks.” The podcast featured FDIC Chairman Jelena McWilliams and Alden McDonald, President and CEO of Liberty Bank, an African American-owned and managed bank, who discussed the critical role of Minority Depository Institutions (“MDIs”) in the U.S. banking system. Chairman McWilliams explained that the number of MDIs is declining and the FDIC seeks to reverse that trend. Mr. Alden explained how MDIs serve the financial needs of communities of color and contribute to their economic well-being. He also explained that where the U.S. may recover from an economic recession in just a few years, it takes almost 10 years for a minority community to recover. Mr. Alden further explained that if not for MDIs, many individuals of color would have no relationship with a bank whatsoever and would have to resort to other types of lenders that charge high rates and fees.

FRB: Federal Reserve Chairman Jerome Powell has also made several speeches on the U.S. economy in which he has underscored the fact that those who are least able to bear the economic fallout from COVID-19 (minorities and women) are suffering the most and that the Fed is using all of its monetary tools to provide monetary assistance to help them.

FTC: On August 5 and 6, 2020, the FTC hosted a virtual resource fair that was open to the public entitled “Working Together to Serve Diverse Communities.” In its invitation, the FTC noted that black, Latino, and other communities of color have been disproportionately affected by the COVID-19 pandemic, which has exacerbated existing economic disparities, and by recent events that require greater attention to justice and equality. The goal of the fair was to provide resources for diverse individuals and communities to access federal services, build stronger relationships, and explore ways that the FTC and other agencies can work together to better serve communities of color. At the fair, nine federal agencies shared information concerning their missions and programs that are available to address these challenges and to strengthen the diverse individuals, families, and organizations that they serve.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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