Agencies Extend Applicability Date of Certain Provisions of their CRA Final Rule

Regulatory Developments

Agencies Extend Applicability Date of Certain Provisions of their CRA Final Rule
On March 21, the Agencies jointly issued an interim final rule granting more time before certain provisions of the previously issued final rule regarding the CRA come into effect. In particular, the Agencies changed the public file provisions and facility-based assessment areas provisions effective dates from April 1, 2024 to January 1, 2026, noting that both provisions reference other provisions that will not yet be in effect as of April 1, 2024. The Agencies also noted that what constitutes a “large bank” under the facilities-based assessment will be subject to change as of January 1, 2026.

FDIC Proposes Revisions to its Statement of Policy on Bank Merger Transactions
On March 21, the FDIC Board of Directors sought public comment on proposed revisions to the FDIC’s Statement of Policy on Bank Merger Transactions (the Statement). Last updated in 2008, the Statement provides guidance on how the FDIC applies the statutory factors established in the Bank Merger Act to bank merger applications subject to its review. These factors relate to the competitive effects of the transaction, the financial and managerial resources and future prospects of the parties, the impact of the transaction on the convenience and needs of the community to be served, the effectiveness of the parties in combatting money laundering and, as added in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) in 2010, and consideration of the impact of the transaction on the stability of the US banking or financial system. Notably, the Statement would provide that transactions resulting in an institution with assets of $100 billion or more are more likely to present potential financial stability concerns and will be subject to additional scrutiny. Revisions to the Statement are intended to be principles-based, identify the types of applications subject to FDIC approval, address each statutory factor separately and highlight other relevant matters, including statutes governing interstate mergers, and applications from non-banks or banks that are not traditional community banks.

The proposed revised Statement is intended to reflect legislative and other developments since it was last amended in 2008, including the inclusion of the financial stability factor added with the Dodd-Frank Act, and follows the FDIC’s March 31, 2022, request for information and comment on the application of the laws, practices, rules, regulations, guidance, and Statement to merger transactions subject to FDIC approval.

Like the FDIC’s recent corporate governance proposal, the proposed Statement was approved by Chairman Gruenberg and Directors Chopra and Hsu and voted against by Vice Chairman Hill and Director McKernan, with Vice Chairman Hill expressing concern that the amendments will “potentially mak[e] the process longer, more difficult, and less predictable” and Director McKernan expressing concern that the update reflects a “quite skeptical view of bank mergers.”

Comments will be due 60 days after publication in the Federal Register.

“There is a strong case to be made that given the critical role that entrepreneurs and small businesses play in our economy and the vast geography of our nation, the U.S. benefits more from having a large number of small and midsized banks, rather than a market structure with just a handful of very large banks, like in Europe and China.”
‒ Rohit Chopra, Director, CFPB

CFPB Director Issues Prepared Remarks at the Peterson Institute for International Economics Event on Revitalizing Bank Merger Review
On March 21, CFPB Director Rohit Chopra spoke at the Peterson Institute for International Economics event on revitalizing bank merger review, discussing his views on bank mergers and consolidation, agency involvement in promoting competition, the current review regime under the Bank Merger Act, the FDIC’s proposed Bank Merger Act Policy Statement, and areas for future reform.

FDIC Updates Its Applications Procedures Manual
The FDIC announced updates to its Applications Procedures Manual, which outlines how the FDIC’s staff processes applications and other requests submitted to it. The FDIC updated: (1) Section 1.1 (Applications Overview) to reflect amendments to the agency’s delegations of authority regarding the review of such filings, to describe the benefits of pre-filing meetings, and to explain the process for requesting comments on filings pending with other federal agencies; and (2) Section 1.2 (Summary of Investigation) to address circumstances where an investigative summary requires concurrence from the agency’s Legal Division and Division of Depositor and Consumer Protection.

Check Out Goodwin’s Latest Industry Insights

New Client Alert: Wisconsin Becomes Third State to Enact Law Regulating Earned Wage Access Services
Following Nevada and Missouri in 2023, Wisconsin has become the third state (and the first in 2024) to enact a law that establishes a financial services oversight regime for earned wage access services, also known as on-demand pay services, which allow workers to access earned but unpaid income before payday. The legislation (AB 574) was enacted on March 21, 2024, and published on March 22, 2024. Wisconsin’s law imposes licensing and other substantive requirements on providers, and it provides important regulatory certainty for these innovative financial services in the state. Along with Nevada’s and Missouri’s laws, Wisconsin’s law may shape similar legislation in other states. Read more about this new law in a recent client alert.

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Traditional credit underwriting methods, which are generally based on credit reports, have not always successfully captured the full picture of a borrower’s ability to repay. It is estimated that more than 45 million US consumers lack sufficient credit history to generate either a credit report or a credit score. Low-to moderate-income (LMI) individuals and underrepresented communities are disproportionally represented in that figure. Approximately 40% of low-income individuals and about 30% of moderate-income individuals have insufficient credit history to generate an accurate credit score. Further, nearly 54% of Black Americans report having no credit or a poor to fair credit score, and roughly 41% of Hispanic Americans are in the same category. To read more of our latest Fintech Flash article, click here.

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