Consumer Advocates Call on Federal Agencies to Regulate Banks

As regulators conduct public hearings, community groups call for better enforcement of law to hold banks accountable.

los angeles, Aug. 16 /PRNewswire-USNewswire/ --  In what is the first public opportunity to assess banking regulations left out of the recent financial reform bill passed by Congress, the federal financial regulators are holding the final of four hearings across the U.S. about the Community Reinvestment Act (CRA) in Los Angeles on Tuesday, August 17.  While many consumer protections were included in the recent Dodd-Frank Act, there have been no major changes to the CRA for a decade and a half despite various shifts in the lending industry and financial landscape.  CRA has been the key positive force assisting low-income neighborhoods and neighborhoods of color to access mainstream financial institutions.

The California Reinvestment Coalition (CRC) and our allies are organizing public testimony from small business owners, community financial lenders and organizations and concerned citizens to identify critical gaps in the current law.  Groups are urging regulators to strengthen oversight and enforcement of the Community Reinvestment Act as a way of assisting in the much needed economic recovery. Lack of strong enforcement of CRA enabled reckless and predatory practices that have devastated thousands of families, businesses and neighborhoods in our state.

Passed in 1977, the Community Reinvestment Act was landmark legislation requiring financial institutions to serve the lending, investment and financial service needs of their communities. Despite the broad power given to the federal regulators to implement CRA regulations, it has increasingly failed to oversee financial institutions in a manner that would protect neighborhoods from predatory lending and disinvestment.

"CRA once meant an end to overt redlining but, in recent years, banks have run amok.  The regulators need to do their job better to be sure that neighborhoods have access to safe lending," said CRC Executive Director Alan Fisher. "These hearings are an opportunity for small businesses and overlooked neighborhoods to be heard."

The regulatory agencies need to look carefully at the following key issues in concert with the CRA Hearings:

• Geographic Responsibility: CRA was written when all bank activity took place around a bank but today there are banks with one or few branches that do most of their business in other areas.  These banks should be held responsible for CRA activity in those areas not just where their one branch is located.
• Loan Product Quality Standards: Bank products must be fairly priced and meet the needs of low-income people and people of color not just the middle class.  Regulators must ensure fair financial opportunities for all neighborhoods
• Transparency: Small Business data must be collected immediately on minority-owned and women-owned businesses as will be rolled out in three to four years by the Dodd-Frank Act.  Small businesses cannot get loan from banks where they have been customers for years and this should be transparent today. Information is also needed on smaller businesses to focus attention on entrepreneurism.
• Subsidiary Lenders: All components of the financial corporation should be examined by the regulatory agencies for their CRA and banking activity.  In the past, corporations could choose not to have certain corporate entities examined by regulators and, too often, predatory practices took place in those subsidiaries.
• Examination Ratings: Regulators should conduct more rigorous examinations and act upon evidence of discrimination.

The California Reinvestment Coalition advocates for the right of low-income communities and communities of color to have fair and equal access to banking and other financial services. CRC has a membership of more than 275 nonprofit organizations and public agencies across the State.

SOURCE California Reinvestment Coalition