WASHINGTON - A federal banking regulator said on Tuesday it will begin soliciting input on decades-old rules on bank lending in low-income communities, kicking off a long-awaited and potentially contentious rule-writing process.

The move by the Office of the Comptroller of the Currency (OCC) to seek public comment is an initial step by regulators to rewrite the 1977 Community Reinvestment Act (CRA) rules, which banks say have become outdated since they were last updated in the 1990s.

The CRA was introduced to address unfair lending and racial discrimination, particularly so-called redlining whereby banks declined to lend in some poor neighborhoods.

The OCC shares responsibility for enforcing CRA rules with the Federal Deposit Insurance Corporation and Federal Reserve, which did not sign off on Tuesday’s consultation.

But both agencies have expressed interest in rewriting the rules. The OCC plans to share responses with the other regulators after a 75-day open period for comment, it said on Tuesday.

Comptroller Joseph Otting, a former banker, has identified updating CRA regulations as a top priority, and the Treasury Department has similarly said bank regulators should look for ways to modernize the rules.

“Stakeholders of all kinds have spoken up, calling the current regulatory framework for the CRA outdated, complex, and cumbersome,” Otting said in a statement on Tuesday.

CRA rules direct banks to extend mortgages and other types of credit to low-income communities where they take deposits. Regulators regularly grade banks on their compliance.

Banks that fail to make the grade face limits on their ability to expand through mergers, acquisitions or adding new branches until issues are addressed, which can take years.

But banks have complained that the existing rules have become outdated as technology has changed how banking and related industries operate. The Trump administration, which is looking across industries for places to trim regulations, has pushed for a more relaxed approach.

The OCC is considering expanding the types of bank activity that would qualify under the rules and potentially broadening the geographic areas where a bank can do business and still comply with CRA, in a nod to the rise of digital banking.

Consumer and fair lending groups agree the rules could be modernized, but are wary of any changes that could lower standards and hurt minorities’ fair access to credit.


Reporting by Katanga Johnson and Pete Schroeder; Editing by Michelle Price and Meredith Mazzilli

Joseph M. Otting speaks after being sworn in as Comptroller of the Currency in Washington. REUTERS/Joshua Roberts