Banks modifying loans, waiving fees and helping communities in the wake of the economic crisis caused by the Coronavirus (COVID-19) will receive credit for these activities under the Community Reinvestment Act (CRA).

The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency (collectively, the agencies) issued notice March 19, 2020 signaling favorable CRA consideration to banking institutions for activities in direct response to COVID-19. Favorable treatment will extend for six months after the national emergency declaration is lifted, unless otherwise extended by the agencies. Critically, the agencies emphasize prudent efforts to modify the terms on new or existing loans for affected low-and moderate-income customers, small businesses and small farms will not be subject to examiner criticism, as they are encouraging banks to work with these customers. The notice highlights the following non-exhaustive list of retail banking and lending activities that will be granted favorable CRA-status:

Working with Customers

  • Waiving certain fees, such as:
    • Automated teller machine (ATM) fees for customers and non-customers
    • Overdraft fees
    • Late payment fees on credit cards and other loans
    • Early withdrawal penalties on time deposits
  • Easing restrictions on cashing out-of-state and non-customer checks
  • Expanding the availability of other short-term, unsecured credit products for creditworthy borrowers
  • Increasing credit card limits for creditworthy borrowers
  • Providing alternative service options to customers with limited ability to access branches
  • Offering payment accommodations, such as allowing borrowers to defer or skip payments, or extending the payment due date, which would avoid delinquencies and negative credit bureau reporting

Community Development Activities

Banks can also receive CRA consideration for community development activities that “help revitalize or stabilize low- or moderate-income geographies as well as distressed or underserved non-metropolitan middle-income geographies, and that support community services targeted to low- or moderate-income individuals.” The following non-exhaustive list illustrates these activities:

  • Loans, investments or services supporting digital access for low- and moderate-income individuals or communities
  • Loans, investments or services supporting access to health care, particularly for low-and moderate-income individuals or communities
  • Economic development activities that sustain small business operations, particularly in low- and moderate-income communities
  • Investment or service activities that support provision of food supplies and services for low- and moderate-income individuals or communities

Importantly, the agencies have recognized the wide-sweeping effects of the COVID-19 emergency, and in response, will grant favorable consideration for the effective period to community development activities that reach beyond the Bank’s CRA Assessment Area and help to stabilize affected communities, provided that such institutions are responsive to the community development needs and opportunities that exist in their own assessment area(s) as well.

Background

The CRA encourages banks to meet the needs of borrowers in their communities. Federal regulatory agencies examine banks for CRA compliance and use this information when determining whether to approve applications for new bank branches. Credit unions are not subject to the act.

If you have any questions on how this may impact your bank, contact one of our compliance specialists in our Financial Institutions Group below:

Lindsey Becker | Internal Audit and Compliance Manager | becker@doeren.com

Jeni Butler | Senior Compliance Specialist | butler@doeren.com

Marcia Baker | Senior Compliance Specialist | baker3@doeren.com

Debbie Rodriguez | Senior Compliance Specialist | drodriguez@doeren.com

Joe Zito | Shareholder | zito@doeren.com

Author

Jeni Butler – Senior Compliance Specialist, Doeren Mayhew.