Alert June 30, 2009

Federal Banking Agencies Seek Comments on Proposed Rulemaking for the Community Reinvestment Act

The Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, and Office of Thrift Supervision, (collectively, “the Agencies”) in a notice of proposed rulemaking, jointly requested public comments on proposed revisions to regulations implementing the Community Reinvestment Act (the “CRA”).

In accordance with the recently enacted Higher Education Opportunity Act, the Agencies are proposing to implement regulations that would require the Agencies to consider, as a factor, when evaluating and rating an insured depository institution’s (“institution”) community reinvestment record, low-cost education loans provided by the institution to low-income borrowers in its assessment area who have an individual income of less than 50% of the area median income. The proposal defines “low-cost education loans” as (1) education loans originated by an institution through a U.S. Department of Education loan program or (2) any private education loan as defined in the Truth in Lending Act, including loans under a state or local education loan program, originated by an institution for a student at an institution of higher education, with interest rates and fees no greater than those of comparable education loans offered through loan programs of the U.S. Department of Education.

The Agencies also propose to incorporate into their rules the statutory language that allows the Agencies, when assessing and rating the community reinvestment record of an institution that is not minority- or women-owned, to consider, as a factor, capital investment, loan participation and other ventures undertaken by that institution in cooperation with minority- and women-owned institutions and low-income credit unions, provided that these activities help meet the credit needs of the local communities in which the minority- or women-owned institutions and low‑income credit unions are chartered. The proposed language would clarify that if the activities of the nonminority- and nonwomen-owned institution benefit the communities in which the minority- or women-owned institutions or credit unions are chartered, then the activities need not also benefit the nonminority- and nonwomen-owned institution’s assessment area.

The Agencies seek comments on all aspects of the proposal, including: the definition of “education loans,” such as whether only loans for borrowers to attend post-secondary education or accredited institutions should be covered; the limitation of CRA consideration to education loans that the institution originated; the determination of which education loans are “low-cost” and which borrowers are “low-income”; the consideration of education loans as consumer loans; and whether it is readily apparent that the proposed provisions are applicable to all institutions.

Public comments on the proposed revisions must be received by July 30, 2009. The joint notice is available at