NEW YORK – The Trump Administration has announced a significant overhaul to the Community Reinvestment Act (CRA), a critical Civil Rights-era law, proposing changes that would notably reduce the number of banks subject to its full compliance requirements and reshape how financial institutions engage with low-to-middle income communities. The Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) jointly unveiled the proposed revisions on Friday, July 31, 2026, marking the first major update to the law’s rules and regulations in nearly three decades.
The Community Reinvestment Act, enacted in 1977, was designed to combat redlining, a discriminatory practice where banks would avoid lending or opening branches in minority-majority or impoverished neighborhoods. The law mandates that regulators document how effectively banks lend to low-to-middle income areas, requiring institutions to undergo regular examinations. A poor CRA rating can carry severe consequences, including restrictions on a bank’s ability to open new branches or merge with other institutions. Furthermore, the data collected under CRA is a vital tool for the Department of Justice in prosecuting redlining cases.
Reduced Compliance Scope for Banks
Under the new proposal, a substantial number of banks would see a reduction in their compliance obligations. The definition of a ‘small bank’ is set to increase significantly, from institutions with under $412 million in assets to those with up to $1 billion in assets. Additionally, banks with assets ranging from $1 billion to $10 billion will now be categorized as ‘intermediate banks.’
These revised thresholds are projected to reduce the number of banks required to comply with certain parts of the CRA by 800 institutions. Consequently, only 86 banks, representing approximately 3% of all financial institutions, would remain subject to the full extent of the CRA’s regulations. The proposed changes also indicate a shift in examination focus, with bank examiners placing greater emphasis on the actual lending activities within specific communities and geographies, and less on factors such as the number of branches opened or the volume of local deposits.
Scrutiny on Community Development Grants
Another contentious aspect of the proposed overhaul concerns how banks contribute to community development groups. Currently, the CRA allows banks to donate to local organizations engaged in poverty reduction or low-income housing initiatives to fulfill their community obligations. The new regulations, however, could narrow the types of groups and programs eligible for such donations.
In a summary of the changes, the bank regulators stated that these revisions would ‘ensure community development grants ‘are not diverted to activist causes or consumed by excessive operating costs.” The proposal also mandates that banks collect more detailed information, including addresses, on who receives their community grants, aiming to enhance transparency. This shift is expected to discourage banks from making grants to national organizations, instead directing their focus towards local groups.
Jesse Van Tol, CEO of the National Community Reinvestment Coalition (NCRC), an umbrella organization for community development groups that frequently receive bank funding under the CRA, expressed strong reservations. Van Tol called it ‘unfortunate’ that bank regulators were ‘politicizing grant making under the CRA.’ He warned that ‘a lot of these changes are going to discourage banks from making grants, particularly in rural areas, where I expect there will be significant drops in activity.’
Regulatory Alignment and Historical Context
Notably, the Federal Reserve, the third major bank regulator, was not a party to the proposal announced by the OCC and FDIC. This absence is significant, as banking groups had advocated for a joint proposal from all three regulators to ensure consistent requirements under the CRA.
The last major revision to the CRA’s regulations occurred in 1995. Since then, administrations from both political parties have made repeated attempts to update the rules to reflect the evolving landscape of banking and financial services over the past three decades. However, these efforts have consistently faced obstacles, whether due to opposition from other regulators, banks, community groups, or legal challenges. For instance, the Biden administration’s own proposed revisions to the CRA rules were ultimately blocked by courts in Texas.
The proposed rules will now undergo a 60-day public comment period, during which banks, community organizations, and other interested parties will have the opportunity to provide feedback. Following this period, the regulations will be finalized, shaping the future of how financial institutions are evaluated on their commitment to serving low-to-middle income communities across the nation.
