Fair Lending Enforcement in 2022: CRA Data Collection Standards


The degree to which regulators enforce fair lending laws can vary depending on the administration in place, and the Biden administration is no exception. The Biden administration is only a year old, so there hasn’t been much time for new litigation, but policymakers appointed by President Biden have issued statements signaling what the banking industry may be up against. expect, including changes in the Trump administration.

This two-part article series explores some of the most high-profile initiatives of the Biden administration. The first article examines the renewed emphasis on combating the practice of redlining and the expanded watchdog role of the Consumer Financial Protection Bureau. This second article examines efforts to recodify the Fair Housing Act (FHA or Act) Discriminatory Effects Standards and enforce the Office of the Comptroller of the Currency (OCC) Final Rule of December 14, 2022 regarding the Act. on Community Reinvestment (CRA) data collection requirements.

Recodification of the HUD Discriminatory Effects Standard

The FHA is contained in Title VIII of the Civil Rights Act of 1968 and prohibits discrimination in the sale, rental, or financing of housing and other housing-related activities because of race, color, religion, gender, disability, family status or nationality. origin. The law gives the Department of Housing and Urban Development (HUD) the authority to administer and enforce the law, including with respect to enforcement and rulemaking.

Housing discrimination can be proven under theories of discriminatory (or disparate) treatment or disparate discriminatory impact/effects. There is discriminatory treatment when the applicant is discriminated against because of his belonging to one of the protected categories; claims based on this theory require proof of intent. But no intent is required under a disparate impact/discriminatory effects theory. This standard applies when an apparently neutral policy is applied universally but has the effect of discriminating against members of the protected classes, even if no discriminatory effect was intended.

In 2013, HUD enacted a rule that contained no new interpretation of the law but codified the long-standing consensus of court agencies regarding the law of discriminatory effects. In 2015, the United States Supreme Court upheld that the FHA provides liability for discriminatory effects (to see Text. Hous dep’t. & County. Business c. Inclusive Communities Project, Inc., 135 S.Ct. 2507, 2523 (2015)). On September 24, 2020, however, HUD issued a rule that removed the definition of discriminatory effects, added pleadings that made it much more difficult to start a case, changed the charge transfer framework, created new defenses and limited available remedies in disparate impact claims. The 2020 rule also limited remedies in disparate effects cases.

Following the publication of the 2020 rule, HUD has been sued by plaintiffs seeking to enjoin the implementation of the rule. The plaintiffs in those three separate federal lawsuits claimed the 2020 rule was inconsistent with the law and also violated the Administrative Procedure Act. Prior to the effective date of the 2020 rule, the U.S. District Court for the District of Massachusetts in Massachusetts Fair Housing CTR vs. HUD found that the 2020 rule in material respects was not supported by inclusive communities or other court rulings and issued a preliminary injunction suspending implementation and postponing the effective date of the rule of 2020.

On January 26, 2021 – less than a week after his inauguration – President Biden directed the department to “take all necessary steps to review the effects of the [2020 rule]including the effect that changing the [2013 rule] has had HUD’s statutory duty to ensure compliance with the Fair Housing Act” and “to take all necessary steps…to implement the requirement of the Fair Housing Act that HUD administer its housing programs. in a manner that… promotes… HUD’s overall obligation to administer the law, including the prevention of practices having an unjustified discriminatory effect. As a result, HUD has now proposed that the 2013 rule be recodified (amending sections 100.5 and 100.500) to expressly recognize the 2013 rule’s discriminatory effect standards.

Application of the ARC 2021 final rule

On December 14, 2021, the OCC issued a Final Rule (Final Rule) that rescinded the 2020 Rule and went into effect January 1, 2022. The purpose of the Final Rule is to:

  1. Create consistent and transparent CRA rules for banks.

  2. Limit ARC-related burdens on banks, banking communities and examiners.

  3. Ensure that the OCC continues to encourage banks to help meet the credit needs of all of their communities, including low- and middle-income neighborhoods, in accordance with safe and sound operations.

Specifically, the final rule provides an evaluation method for (1) smaller banks that will streamline and emphasize loan performance; (2) small intermediary banks that will consider lending and community development activities; (3) large retail banks that focus on lending, investment and service performance; and (4) wholesale and limited purpose banks that will be based on community development activities. This new rule will place more emphasis on where banks have large deposits and less on the location of branches.

In addition, the final rule requires major banks to collect, retain and report certain data relating to proposed performance tests and standards. The OCC will make this data available through individual and aggregate disclosure statements. In addition, banks will make this CRA-related information available in their public records and post CRA notices at specific locations.

In addition, the final rule restores requirements regarding the content and location of the public record and public notices that were revised or removed in the June 2020 rule. The final rule also restores separate rules for domestic banks and savings associations that the June 2020 rule incorporated.

Regarding execution, the final rule states:

  1. The OCC has the power to prescribe these regulations for national banks, federal savings associations and state savings associations and has the power to enforce these regulations for national banks and federal savings associations.

  2. The FDIC has the authority to enforce these regulations for state savings associations.

While the final rule includes few (if any) changes regarding the application of ARC, it appears there will be more oversight and regulation due to increased data collection and new evaluation methods.

To summarize the two articles in this series, it is important to recognize that political winds will always blow and, over time, will blow in many directions. However, the general stance of the American public against systemic discrimination, supported by growing demographic diversity, means that for the next three years of the Biden administration – and possibly longer – banks and other service industry players Financiers will face increasing pressure to ensure equity in lending, community reinvestment, and other economic policies and programs.


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