CRA and the CAC

When the Consumer Advisory Council ("CAC") met on March 30, 2000, the pending implementation of "CRA in the Sunshine" was one of three agenda topics. Agenda items are first discussed in committees. The committee reports its discussion and any recommendations to the full Council and other council members add their views.

The Banking Regulations Committee, chaired this year by Malcolm Bush of the Woodstock Institute, was responsible for discussing issues related to CRA in the Sunshine. He introduced the committee's findings by stating that the new law was intended to "root out alleged extortion and bribery." He then stated his view that it is "bizarre to even think that this exists."

Bush's view is that community groups are not bribing financial institutions; they are setting new targets for CRA performance. He did state that "sometimes?small sums are promised to groups for the purpose of preparing new borrowers."

The CRA committee discussed three primary issues: who and what is covered; the reporting requirements; and sanctions. Like the privacy discussion, this, too, became bogged down in the discussion of technicalities.

The CAC's Vice chair, Lauren Anderson, Executive Director of Neighborhood Housing Services of New Orleans, Inc., expressed concern that the law not have unintended consequences. She was concerned that the law could be interpreted so broadly that any check written by a bank to a community organization for any purpose would be construed to create an agreement subject to the sunshine rules. This could have a dramatic chilling effect on voluntary and constructive exchanges and projects.

Even though donations and investments might be made without any expectation of the production of borrowers by the community group, the community groups' representatives expressed concern that they could be expected to produce reports naming what products or services the group provided to the bank. Anderson stated that this reasoning raises their concern that the law will lead a bank to expect specific results.

Anne Li, Executive Director of the New Jersey Community Loan Fund, raised additional concerns that the law might be interpreted to bring in related but non-CRA organizations such as health service organizations. These groups might not understand that accepting a donation from a bank could trigger reporting.

Marta Ramos, CRA Officer for Banco Popular raised some concerns about reporting from the banking side of the table. She stated that, for purposes of assessing CRA performance, she collects information about projects throughout her bank. However, most of the projects that she identifies for CRA assessment purposes were initiated without specific CRA targets or even awareness. She is concerned that many projects could be missed in the reporting.

This raises the issue of whether any activity the bank identifies for CRA purposes should automatically be subject to the reporting or whether only projects entered through formal agreements between the bank and a community group should be covered. (i.e., there is a difference between what should be subject to the sunshine provisions, and what the bank identifies for its CRA performance.)

In this discussion, it became clear that community groups are looking for ways to avoid being subject to the reporting requirement. There were ideas such as not including any reference to CRA in the agreement or including a provision that the parties agreed that it would not be subject to reporting.

Overall, the community groups objected to the concept of reporting and urged the Board to interpret the law narrowly. They did not want the rule to have a chilling effect on the many constructive relationships that exist.

Several ideas for reporting were suggested as ways to simplify reporting. These ideas included using audited financial statements and tax returns in lieu of specially prepared reports.

These ideas would not necessarily result in reporting how specific funds paid by banks were used - the idea behind the legislation - but it would expose the group to public scrutiny.

ACTION STEPS

Prepare a sample report from your bank's activity in the past year or two. Use this to provide specific information in your comment letter on what should be reported and how detailed the reports should be.
Review your CRA-related loans, investments, services and donations. Consider them in the context of a reporting requirement.
Consider which efforts should be subject to reporting, and why. Then put this in your comment letter.
Meet with staff that works with community groups. Talk about the process, from establishing contact through reaching agreements and carrying out projects. Think about what you learn in the context of possible reporting.
Write a Comment letter!