Trump administration bank regulators moved Friday to close what one nonprofit consulting firm has advertised as the “CRA Goldmine,” curbing the ability of left-wing advocacy groups to use an anti-redlining law to pressure banks for donations.
Community organizations can challenge a bank’s record under the Community Reinvestment Act when it seeks approval for a merger, acquisition or new branch. The prospect of a poor CRA grade, which can delay or derail those plans, has given activist groups leverage to press banks for grants and other financial commitments.
Bridge Philanthropic Consulting, which advises nonprofit organizations on fundraising, has promoted the system in a guide titled “The CRA Goldmine: How Your Nonprofit Can Unlock Millions in Bank Funding.”
The proposal from the Office of the Comptroller of the Currency and Federal Deposit Insurance Corp. wouldn’t stop banks from donating to advocacy organizations. It would limit when those donations help a bank’s CRA rating, weakening the regulatory leverage activists can use to extract them.
The proposal from the Office of the Comptroller of the Currency and Federal Deposit Insurance Corp. wouldn’t prevent banks from donating to advocacy organizations. It would limit when those donations help a bank’s CRA rating, reducing the regulatory leverage activists can use to extract them.
Banks seeking CRA credit for grants and donations would have to show that the money directly supports a specific community-development program in the local area and isn’t merely funding activism.
The changes are intended to ensure that bank grants aren’t diverted to “activist causes or consumed by excessive operating costs,” the agencies said in a summary of the proposal.
The CRA, enacted in 1977 to combat redlining, requires regulators to assess how well banks meet the credit needs of the communities where they operate, particularly low- and moderate-income neighborhoods. Regulators consider those records when banks seek approval for mergers, acquisitions and new branches.
The proposed rules would require grant recipients to commit in writing that funds will be used for specific qualifying activities in the bank’s assessment area. Recipients of grants from large banks would also have to attest that indirect costs associated with administering the grant don’t exceed 15 percent and provide supporting documents, including tax filings and operating budgets.
The agencies are seeking public comment on whether the restrictions are sufficient and whether grants and donations should be excluded from CRA consideration altogether.
Comptroller of the Currency Jonathan Gould told the New York Post that the proposal would prevent banks from purchasing regulatory favor through donations to progressive organizations.
“Today’s proposed reforms will help ensure the CRA is no longer used as a social credit score for banks, nor as a funding mechanism for activist NGO networks under the guise of community development,” Gould said in a post on X.
The New York Post’s ace financial journalist James Franey broke the news of the rules changes. He reported that the National Community Reinvestment Coalition urged regulators in 2023 to downgrade KeyBank’s CRA rating over its mortgage-lending record. KeyBank and the coalition announced a $25 million agreement the following year.
The proposed overhaul would place greater weight on lending throughout CRA examinations. Regulators would stop evaluating deposit products as retail banking services and concentrate their review of a bank’s lending on its major product lines. Intermediate banks could receive an overall satisfactory rating based on strong lending performance even if their community-development performance fell short.
The agencies would also raise the asset thresholds that determine how banks are examined. Banks with less than $1 billion in assets would be considered small, up from the current $412 million threshold. Banks with between $1 billion and $10 billion would be placed in an intermediate category, while only those above $10 billion would face the full large-bank examination and reporting regime.
Under the proposed thresholds, 86 of the roughly 3,577 banks overseen by the OCC and FDIC would be classified as large. Those institutions hold more than 85 percent of the industry assets supervised by the two agencies.
Sen. Elizabeth Warren of Massachusetts and other Democrats on the Senate Banking Committee said the proposal would “gut” a tool for encouraging investment in underserved areas and “make America’s housing crisis worse.”
The Federal Reserve, which administers the CRA for state-chartered member banks, didn’t join the proposal. If the OCC and FDIC complete the rule without the Fed, banks could face different CRA standards depending on which federal agency supervises them.
The three regulators jointly adopted a broader CRA overhaul in 2023 that sought to extend examinations to areas where banks made substantial numbers of loans without maintaining branches. A federal judge blocked that rule before it took effect, finding that the agencies likely exceeded their statutory authority.
The OCC and FDIC dropped their appeal in July and are seeking a judgment that would prevent them from using an expansive interpretation of the CRA to evaluate lending beyond banks’ branch-based communities or to regulate deposit products. The Fed has said decisions about its next steps remain with its governors.
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