WASHINGTON, July 31 - Two federal bank regulators circulated a proposal on Friday to change how some fair-lending rules are enforced, increasing oversight of community development grants while widening relief for smaller banks from selected reporting obligations.
The proposal, put forward by the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC), would tighten requirements around what are known as community development grants. Under the draft, banks would need to show that the bulk of funds disbursed via these grants are actually deployed in the communities they are intended to serve and that recipient organizations are not burdened by excessive overhead costs.
At the same time, the plan would expand exemptions for smaller institutions. Banks with less than $10 billion in assets would be relieved of some data collection and reporting requirements - an increase from prior relief that applied to banks with assets under $1.65 billion.
Regulators described the proposal as an effort to reduce compliance burdens on banks while ensuring that grant dollars produce tangible benefits in targeted communities. The change is part of a continuing effort to update regulations tied to the Community Reinvestment Act (CRA), first enacted in 1977 to address discriminatory lending practices known as redlining.
Democratic lawmakers responded quickly and sharply. Senator Elizabeth Warren and other Democrats on the Senate Banking Committee said the proposal would effectively "gut" a critical mechanism for driving community investment. In a separate statement, the group warned: "This proposal would make America’s housing crisis worse."
Complicating the rule's path forward is the absence of a companion proposal from the Federal Reserve, which shares responsibility for enforcing the CRA. The three regulatory agencies historically aim to issue matched rules to prevent a fragmented regulatory framework for banks. The Federal Reserve declined to comment on the new draft.
The proposal follows a prior, contested attempt to revise CRA rules in 2023. That prior set of stricter regulations was later rescinded under President Donald Trump after a legal challenge from the banking industry.
Context and next steps
The FDIC and OCC's draft represents the latest step in an ongoing rulemaking process. Because the Federal Reserve has not published a parallel proposal, the measure's ultimate form and whether it will be adopted remain uncertain. Stakeholders will watch whether the agencies proceed with finalizing the draft and how lawmakers and industry groups respond during the public comment period.