Consider how you conduct your finances. Do you go to a physical bank branch, withdraw or deposit cash, and grab a complimentary lollipop? Or do you take a picture of a paycheck and deposit in your account using your phone?
More Americans are opting for the latter, according to a Federal Reserve survey; in 2017, about half reported using a mobile app to access their bank account over the previous year.
The shift to mobile banking is transforming not only the way that banks do business, but also how policymakers think about the laws that govern our financial system. The latest instance is a reconsideration of the Community Reinvestment Act, a landmark anti-discrimination law enacted in 1977.
Comptroller of the Currency Joseph Otting, a congenial banker-turned-federal bank regulator, sees rewriting regulations around the CRA as a major priority. In August, his agency put out an advance notice that it meant to overhaul the rules, suggesting the administration would seek broader definitions of “community reinvestment,” beyond measuring how a bank serves an immediate geographic area. Doing so would grant more flexibility for banks to satisfy the requirements.
At lot is at stake: Banks that don’t receive satisfactory grades on their annual CRA evaluations can be restricted from merging or acquiring other banks, among other actions that require regulatory sign-off.
There’s some precedent for what Otting is seeking to do: Financial institutions that serve military members can treat all depositors, rather than a set geographic area, as the baseline for their CRA assessment.
But the proposal has yet to win over skeptics, and supporters fear it could face strong headwinds from other regulators, who have yet to engage with the effort.
Speaking to reporters at a recent event at Georgetown University Law School, Otting downplayed the lack of public input from other banking regulators, saying his agency’s staff coordinated with their counterparts at the Federal Reserve and Federal Deposit Insurance Corporation before publishing their initial draft.
Still, congressional Democrats remain wary. Many represent urban areas or majority-minority districts hurt by redlining, the practice of excluding areas or neighborhoods from home loans and other banking services, often on the basis of race.
Otting drew the suspicion of some of those members of Congress earlier this year with a comment during testimony that he had not personally seen discrimination during his banking career, though he added that he believes it exists.
In one of over 1,000 comment letters on the drafted rule, Congressional Black Caucus Chairman Cedric Richmond, D-La., highlighted Otting’s remark as a concern.
“You said, ‘People have told me it exists, so I trust them when they tell me that’ in the initial hearing. The very next day in another hearing, you did not course correct in a way that left the listener believing that you were serious about addressing pervasive discrimination in America that continues to exist,” wrote Richmond. “The fact that someone can express ignorance about discrimination’s continued stain on this country while being empowered to re-write the regulatory apparatus by which discriminatory lending is remedied causes this Caucus significant concern.”
While Richmond alone signed the letter, the caucus contains over 30 members, several of whom are senior members of the House Financial Services Committee that oversees banking policy, including incoming chair Rep. Maxine Waters, D-Calif. The caucus, consumer activists, and others on the left, fear that the proposal would defang the anti-discrimination law by grading on a lower, and broader standard.
Waters, one of President Trump’s most vocal congressional critics, hails from a district based around Los Angeles, and plans to make the CRA rule rewrite a major focus when she holds the committee gavel next year, which could create friction for the effort. But Otting, who was president of CITIBank, and led its Pasadena, Calif.-based subsidiary OneWest Bank, before taking his current position in the Trump administration, was confident his working relationship with Waters from his time in SoCal would smooth over any friction.
“I have worked with Maxine Waters for over 20 years,” said Otting. “She is very tuned in to CRA, it’s always a critical agenda item for her.”
Added Otting: “She’s a very engaging, get-it-done kind of person, so I think it’ll actually be very good for us.”
