Community Reinvestment Association of North Carolina

PROTECT OUR COMMUNITIES - HELP SAVE CRA!

WRITE A LETTER TO THE OTS BY JAN 24, 2005

The Bush Administration's second term assault on legislation that favors communities over the needs of big business has begun.  In their crosshairs is the Community Reinvestment Act (CRA), enacted in 1977 and strengthened during the Clinton years.  CRA requires banks and thrifts to provide banking services to low and middle-income neighborhoods.

The Office of Thrift Supervision (OTS) is accepting public comment through January 24, 2005 (regs.comments@ots.treas.gov, include No. 2004-53 in subject line) on proposed changes that would weaken how CRA is enforced, and now is the time for concerned citizens to speak out against this ill-conceived proposal.

The OTS regulates the nation's thrifts, aka savings & loans (S&L's).  In the fall of 2004, the OTS pushed through another change that weakened CRA.  The agency exempted thrifts with less than $1 billion in assets from having to meet the most rigorous CRA tests, an increase from the previous level of $250 million.

Currently, banks and thrifts are periodically graded to make sure they are fulfilling their obligations under CRA to serve low & middle income communities.  The CRA exam for large thrifts includes three parts - lending, investment, and service tests.  Under the OTS proposal, large thrifts will be allowed to eliminate their investment or service tests or decide how heavily they want to weight each part, as long as lending does not fall below 50% of the total test.  Allowing thrifts to design their own exams makes a mockery of the CRA's intent, which is to ensure banks uphold their responsibilities to serve all citizens.

The OTS' proposed changes to CRA also include a change in the definition of "community development" to include all development that takes place in rural areas, including affluent neighborhoods.  This is a slap in the face to CRA's basic purpose, which clearly mandates investments in low and middle income communities.  Under OTS' proposal, thrifts would receive community development credit for investing in golf courses and other luxury projects located in rural areas.

Letting the thrift industry police itself would put the foxes in charge of the henhouse.  And why tamper with legislation that’s widely heralded as a success?  The New York Times reports that housing groups credit the CRA for funneling more than $1.5 trillion into low income neighborhoods since its inception.  These investments have funded affordable housing, medical clinics, and other worthy community development projects.

The CRA has changed banks and thrifts for the better by preventing them from discriminating against poor and minority loan applicants.  If CRA is weakened, banks and thrifts will reduce their commitments to low and middle income communities.  More consumers will be forced into predatory lending traps such as subprime mortgages, payday loans, and high-priced check cashing services.  

You can take action to stop these proposed changes to CRA!  Express yourself by sending comment via letter or e-mail to the Office of Thrift Supervision.  Please forward this e-mail to friends, co-workers, or any e-mail listservs you have access to.  Below is a sample letter prepared by the National Community Reinvestment Coalition (NCRC).  For additional research on this issue, see the following links

http://www.ncrc.org/pressandpubs/featureStory.php

http://seattletimes.nwsource.com/html/businesstechnology/2002112442_cra08.html

http://www.tompaine.com/articles/dismantling_the_dream.php

http://www.pbs.org/newshour/bb/economy/july-dec04/community_12-20.html

Comments are due by January 24, 2005.  You can e-mail the OTS at regs.comments@ots.treas.gov, and include the OTS docket number, No. 2004-53, in the subject line of your e-mail.  Or fax a letter to (202) 906-6518.  Or mail it to Regulation Comments, Chief Counsel's Office, Office of Thrift Supervision, 1700 G Street, NW , Washington , DC 20552 , Attention: No. 2004-53.  If you prefer to sign an on-line form letter, go to http://www.ncrc.org/letters/ots_letter.php

Please cc CRA-NC on your e-mailed comments, send to action@cra-nc.org.  If you'd like to learn how to become more involved with the campaign to save CRA, contact Erik at (919) 667-1557 or Josh with the NCRC at (202) 628-8866.  This is a fight our nation's communities can't afford to lose.

Sample letter:

Regulation Comments - Chief Counsel's Office - Office of Thrift Supervision

1700 G St. NW , Washington DC 20552   

Attention: No. 2004-53

To Whom it May Concern:

I am writing to oppose your CRA Streamlining Proposal.  This proposal contradicts the purpose of the Community Reinvestment Act (CRA) because it will significantly reduce the amount of community development financing and basic banking services in low- and moderate-income communities.  You would allow thrift institutions to design their own watered-down Community Reinvestment Act (CRA) exams.  The thrifts could eliminate the investment and service parts of the CRA exam, meaning that you would not require them to make investments in or provide branches to low-and moderate-income communities. 

Currently, large thrifts with more than $1 billion in assets have a "three part" CRA exam that consists of a lending test, an investment test, and a service test.  Under your proposal, a large thrift can choose to eliminate its investment and service tests, and thus only have to pass a lending test. Or it can choose to have miniscule investment and service tests, meaning that the lending test counts for virtually all of the total grade.

The danger with this proposal is that large thrifts can get away with neglecting pressing community needs.  The "design your own easy CRA exam" option will increase the amount of abusive payday loans, check cashing, and other high cost services in low- and moderate-income communities since thrifts will reduce their provision of basic banking services after implementing their own easy exams.

At the same time, your proposal would allow thrifts to finance community development of affluent communities, not lower income neighborhoods, in rural areas and areas afflicted by natural disasters.  This is contrary to the purpose of CRA to combat redlining of low- and moderate-income communities.  

Please withdraw your proposal.  If you have any questions, please call me at _______________ (OTS is asking that e-mail comments include phone numbers).

Sincerely,

Your name and organization

cc Community Reinvestment Association of North Carolina (CRA-NC)

sample letter in pdf