[co-author: Brandon Mohamad*]

On March 21, the FDIC, Fed, and OCC jointly issued an interim final rule to extend the applicability date of certain provisions of the Community Reinvestment Act (CRA) final rule and requested comments on the extension. The CRA, was enacted to encourage banks to help meet the credit needs of low- and moderate-income communities. The new rules, adopted in October 2023, are an effort by federal regulators to increase the CRA’s scope and rigor as well as modernize it for the digital age by better accounting for banks’ internet and mobile banking services. While previous CRA exams focused on the low- and moderate-income lending that banks do around their physical branches, the new rules add the possibility of new assessments in places where banks have online customers.

In order to “promote clarity and consistency,” the agencies have postponed the applicability date of the facility-based assessment areas and public file provisions from April 1, 2024, to January 1, 2026. Those provisions, finalized by the Federal Reserve and other agencies under the CRA, would require large banks to stop using assessment areas that partially cover counties. Instead, these areas would have to include whole counties. According to federal officials, the delay is expected to provide “greater stability and certainty for banks.” It will prevent some “large” banks from having to implement the whole-county requirement with the possibility that the requirement may be lifted shortly thereafter. As a result, banks would not be required to modify their assessment areas or public files in response to the final rule until the new 2026 date.

Public comments on the postponed implementation date must be received 45 days following the rule’s publication in the Federal Register

*Brandon Mohamad is a law clerk in the firm’s New York office.

Putting it into Practice: Uncertainty regarding the current regulatory landscape persists pending the outcome of lawsuits by trade associations against the new rules. It is clear from the current climate that litigation is proving to be an effective tool that industry groups are using to confront federal regulators. For now, institutions should continue to pay close attention to the outcome of these cases for clarity regarding the scope of their compliance obligations and use the 21-month extension period to internalize any potential impact the changes to the community lending rules will have on their affairs.