McHenry: The Current Community Reinvestment Act is an Analog Approach to a Digital World
Washington,
January 29, 2020 -
Today, the House Financial Services Committee is holding a hearing with Comptroller of the Currency Joseph Otting on the recent joint proposal from the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) to modernize the Community Reinvestment Act (CRA). Republican members of the Committee will examine how the proposed rule will strengthen the CRA by providing clarity and transparency, while encouraging greater investment in the communities that need it most.
Watch Republican Leader of the House Financial Services Committee, Patrick McHenry’s (NC-10), opening remarks here.
Ranking Member McHenry’s opening remarks as delivered:
“Well thank you, Chairwoman Waters, and thank you Comptroller Otting for being here.
“I would like to take a moment to first recognize the newest member of our Committee, Congressman Van Taylor, of Plano, Texas.
“Van, we welcome you to the Committee. I will also counsel you that not all hearings are quite as interesting as this one, is that right Chairwoman Waters?
“We thank you, we know that we have got quite a Texas contingent here on the Committee, and so I won’t make any Texas jokes.
“So with that, Comptroller Otting, I applaud you and FDIC Chair McWilliams for your efforts to reform and modernize the Community Reinvestment Act. This is a long time coming.
“It’s been 40 years since the CRA was enacted, and a lot has changed in the banking industry—much of it driven by technology. The rise of mobile and online banking helps more consumers in communities that the CRA was intended to serve. And so this proposal takes those developments into account in the changing nature of banking.
“The current CRA regulations are outdated and technologically ineffective—it is an analog approach to a digital world. That needs to change, your proposal moves us in the right direction. The FDIC and OCC’s proposal seeks to modernize the CRA to ensure it meets the current needs of communities and financial institutions alike.
“The proposed update will increase the transparency and objectivity that is currently lacking in CRA examinations today and will increase the effectiveness of the statue generally.
“We can no longer measure a bank’s commitment to its community based off the number of physical branches it has.
“While branch banking remains important and remains an important part in serving customers, there has been significant growth in the demand for digital banking services, especially in the post-crisis era.
“As demographics shift and millennial customers become more essential to a financial institution’s long-term viability, the demand for financial technology increases.
“Today, there is a growing focus on a refined online and mobile banking model that incorporates sophisticated data collection capabilities to deliver more personalized and engaging experiences.
“As banks’ lending presence expands beyond their physical locations because of technology, we need to ensure that our regulation also involves and evolves to that changing nature.
“These reforms addressed in the CRA review will address CRA ‘hot spots’ -- by encouraging internet-only banks, such as those headquartered in Salt Lake City, Wilmington, Delaware, or Sioux City, South Dakota, to push portions of their CRA activities to where they take deposits, including communities that need them the most.
“In fact, in a 2019 survey conducted by the American Bankers Association titled “How Americans Bank,” online and mobile banking methods are used most often.
“Approximately 73% of consumers preferred financial services provided to them digitally, compared to 17% who prefer going to a branch, or 6% who use ATMs, 3% who bank over the phone, or 1% who bank through the mail. I’d like to know who those 1% are.
“Digital transformation is one of the top trends in the retail banking industry. Retail banks understand the power of fintech and how essential it is to their success. They realize that “going digital” is more than a marketing strategy; it’s a fundamental shift.
“And so, I am encouraged by the CRA proposal, and what it will do to more effectively help low- and moderate-income consumers and communities.
“I look forward to hearing today, thank you for your testimony, and I look forward to the questions.”
Learn more about today’s hearing here.
