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Law360 (March 19, 2020, 3:58 PM EDT ) Federal banking regulators said Thursday that waiving late-payment fees, increasing credit card limits and taking other steps to support consumers affected by the COVID-19 pandemic can earn banks credit toward their Community Reinvestment Act requirements.
In a joint statement, the Federal Reserve, Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency pledged to give "favorable consideration" to banks under the CRA for their efforts to assist lower-income borrowers, small businesses and small farms experiencing hardships as a result of the novel coronavirus.
The agencies outlined examples of actions directed at these affected customers that could receive CRA consideration, including forgoing overdraft charges and other account fees, boosting credit limits, expanding short-term loan programs and extending payment deadlines.
Modifying the terms on their outstanding loans and easing terms on new loans could also qualify, according to the statement.
"The agencies recognize that such efforts — when consistent with safe and sound banking practices and applicable laws, including consumer protection laws — serve the long-term interests of these communities and the financial system," the statement said.
The Fed, FDIC and OCC share responsibility for administering the Community Reinvestment Act, a 1977 law intended to combat discrimination in lending and promote equal access to credit.
Under CRA regulations, banks are periodically graded on how good a job they're doing providing financing to lower-income and underserved communities where they do business. The evaluation process is complex but consequential — without decent compliance scores, banks can be denied the regulatory approvals needed to grow.
Thursday's statement signals that the three banking agencies are willing to be more flexible in this evaluation process as a way to encourage banks to show leniency to customers grappling with fallout from the COVID-19 pandemic, which in the U.S. alone has killed more than 100 people, sickened more than 10,000 and triggered widespread business closures that threaten to throw millions out of work.
Banks will also be able to earn CRA consideration for loans and other support for community development in struggling areas, the agencies said. Example activities cited include providing financing for health care services, investments in food supply access and assistance that helps small businesses operate.
And given the breadth of the pandemic's economic impact, the agencies said a bank's development activities may qualify even if they occur outside the territories where the bank is usually scored on its CRA compliance.
"Favorable consideration will be given to community development activities located in a broader statewide or regional area that includes a bank's CRA assessment area and that help to stabilize communities affected by the COVID-19, provided that such institutions are responsive to the community development needs and opportunities that exist in their own assessment area(s)," the agencies said.
Thursday's statement, which is supposed to remain in effect for up to six months after the COVID-19 national emergency declared last week is over, builds on the agencies' recent efforts to enlist banks' help in cushioning the blow to consumers from the pandemic.
Last week, for example, the agencies joined with other federal and state banking regulators to urge banks and other financial institutions to "work constructively" with borrowers in places affected by the coronavirus and promise that examiners won't criticize reasonable accommodations.
The Fed, FDIC and OCC have also been engaged for months in an effort to overhaul how banks are evaluated for CRA compliance. Before the pandemic struck, a controversial package of changes proposed by the FDIC and OCC was on track to be finalized by as early as May or June, but that timing is now widely expected to slip as the regulators contend with the repercussions of the virus.
--Editing by Jack Karp.
Update: This story has been updated with additional detail.
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