FDIC Votes to Propose Changes in Community-Lending Law

Federal regulators are proposing changes in a community-lending law that would ease requirements for smaller banks, making them undergo government review less frequently.

The directors of the Federal Deposit Insurance Corp. voted unanimously at a public meeting Tuesday to propose the rule changes to the Community Reinvestment Act, the 1977 law that requires banks to make loans in low-income and minority areas where they operate as a condition for opening new branches. The FDIC opened the proposals to public comment for 60 days.

The other major federal agencies that oversee banks -- the Federal Reserve, the Office of the Comptroller of the Currency and the Office of Thrift Supervision -- either have taken similar action or are expected to do so soon.

Regulators say the changes, in the works for about two years, are needed to reduce a paperwork burden on smaller banks and to more clearly define predatory lending, which gives banks a lower rating under the community-lending law, known as CRA.

Consumer and advocacy groups, including the National Assn. for the Advancement of Colored People and the U.S. Conference of Mayors, have protested to President Bush and the regulators, saying the changes could hurt the disadvantaged.

The agencies propose, for example, to raise the threshold for smaller banks -- which are examined for their community lending less extensively and less frequently, and have fewer related reporting requirements -- from assets of less than $250 million to less than $500 million.

FDIC spokesman David Barr said all banks would continue to be examined for lending in disadvantaged areas.