OCC Issues Updated Policy for Determining the Impact of Discriminatory or Illegal Credit Practices on Community Reinvestment Act Ratings: OCC Issues Policies and Procedures Manual Update Setting Forth a Framework for Determining the Effect of Evidence of Discriminatory or Other Illegal Credit Practices on CRA Ratings for OCC-Supervised Institutions

Sullivan & Cromwell LLP - October 13, 2017

On October 12, the Office of the Comptroller of the Currency (“OCC”) issued a bulletin announcing revisions to its Policies and Procedures Manual (“PPM”), which outlines the OCC’s policy and framework for determining the effect of evidence of discriminatory or other illegal credit practices on the Community Reinvestment Act (“CRA”) evaluation and assigned rating of national banks, federal savings associations, and federal branches.  The OCC’s regulations governing CRA assessments require an evaluation of the bank’s record of helping to meet the credit needs of its assessment areas through its lending activities, and these revisions to the PPM help restore regulatory balance by ensuring that CRA compliance is assessed according to the intended purpose of the CRA rather than as a “catch all” secondary mechanism to enforce consumer compliance.  These regulations tie CRA evaluations specifically to CRA lending performance, providing that “[t]he OCC’s evaluation of a bank’s CRA performance is adversely affected by evidence of discriminatory or other illegal credit practices in any geography by the bank or in any assessment area by any affiliate whose loans have been considered as part of the bank’s lending performance.”  Because the OCC has “discretion to determine how a bank’s CRA evaluation and rating are adversely affected” by such evidence, the updated PPM signals the OCC’s current approach to exercising such discretion by providing public guidance to examiners of banking organizations examined by the OCC.