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Financial regulators in the Trump administration are proposing changes to a banking industry rule that critics say has been diverted from its original purpose to funneling funds from financial institutions to left-wing advocacy groups.
The Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation on Friday announced a proposed rule that would make changes to the Community Reinvestment Act (CRA). The law was enacted in 1977 to prevent so-called “redlining” – a practice in which some banks wouldn’t give loans in low-income or minority neighborhoods, or offer depository services.
Among the proposed changes are provisions aimed at increasing the focus on lending and ensuring community development grants and donations go to the intended communities, rather than being diverted to other activities. Critics have argued that banks have met regulators’ requirements in part by donating to advocacy groups.
Comptroller Jonathan Gould said in a post on X that, “Under the Biden Administration, the Community Reinvestment Act became an onerous tax on community banks that failed to drive investment into the very regions they were meant to serve.”
“Today’s proposed reforms will help ensure the CRA is no longer used as a social credit score for banks, nor as a funding mechanism for activist NGO networks under the guise of community development,” Gould wrote.
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Key GOP lawmakers in Congress who serve on panels with oversight of the financial services committee applauded the regulatory move on social media.
Rep. Andy Barr, R-Ky., who is a member of the House Financial Services Committee and chairs the subcommittee on financial institutions, said, “For years, left-wing activist groups have weaponized the Community Reinvestment Act to pressure financial institutions far beyond Congress’s original intent.”
“Instead of expanding access to credit, the CRA has too often become a tool to limit access to capital. I welcome the Trump Administration’s commonsense reforms to restore the law to its intended purpose and refocus it on lending and community investment,” Barr added.
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Sen. Katie Britt, R-Ala., who serves on the Senate Banking Committee and chairs its subcommittee on housing and community development, said in a post on X that she welcomed the proposal to “restore a more practical” framework for the CRA.
“Community banks should be focused on expanding access to credit, supporting small businesses, and strengthening local communities, not navigating unnecessary regulatory burdens or subsidizing activist causes,” Britt said.
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Conservative activist Christopher Rufo called the proposed rule a “big deal” and a “win for Scott Bessent” in a post on X, adding that the CRA “has been used as a mechanism for shaking down banks to fund left-wing activism.”
The proposed rulemaking from the OCC and FDIC would aim to ease burdens on banks with $10 billion or less in assets, giving them more flexible supervision without subjecting them to data collection, maintenance and reporting requirements.
It would also focus regulation on credit services, excluding deposit services, and streamline other requirements to improve the clarity, transparency and objectivity associated with CRA evaluations for banks of all sizes.
Gould added that the OCC will continue to implement the vision of President Donald Trump and Treasury Secretary Scott Bessent by “taking steps to reduce unnecessary regulation and propel economic growth on Main Street.”
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