Woodstock Institute President & CEO Horacio Mendez delivered the below testimony to the Federal Reserve Board in Washington, DC at a public outreach meeting regarding the Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA) on March 26, 2026. Woodstock’s comments specifically address the Community Reinvestment Act (CRA), one of the topics under review at the meeting.
Good afternoon and thank you for inviting me to participate in this EGRPRA hearing. I’m the President and CEO of the Woodstock Institute, a 53-year old Chicago-based research and policy non-profit focused on consumer financial protection.
In the Kansas City hearing last year, we spent a minute asking whether EGRPRA has been subjected to its own EGRPRA analysis. I’m assuming not, but I’m going to put it out there again. We also asked to reduce regulatory burden by taking a pause in creating so much regulatory instability … this whole debanking thing created a BSA / KYC fire drill which was not without its own burden; saying reputation risk or disparate impact isn’t a thing, until it is again, doesn’t really help anybody; and adding additional citizenship requirements on SBA loans is drying up small business lending in communities around the country … which can’t be a good thing for our economy; nor is forcing people to find their birth certificate or get a passport to open a checking account. So … please stop. I have the Fed as a captive audience today, but this goes for your FFIEC cousins as well.
For the DC hearing, we have four suggestions; and I’ll start off with two that are relatively low hanging fruit.
First, it’s come to my attention that the Fed still hasn’t aligned Public Welfare Investment authority under Reg H with the CRA. The OCC and the FDIC have taken care of this, so I don’t think it’s an insurmountable hurdle for the Fed to eliminate the need for state member banks to get prior approval from the Board to make a public welfare investment that qualifies under the CRA.
Secondly, the three most triggering words for CRA Officers are “internal regulatory guidance.” This guidance, which usually flares up at the worst possible time during an exam, is rarely, if ever, made public. If internal regulatory guidance is discussed and being used by examiners, it’s official policy and must be made public.
Now onto the slightly more involved recommendations.
So many criticisms of the CRA have to do with claims that covered institutions don’t know “how much is enough” and that exams are too subjective in what counts and what doesn’t. For those that complain the most, the best way to shut them up is to have them create a Strategic Plan. But the current Strategic Plan process is woefully out-of-date when it comes to collecting community input on a draft Plan. Here are some parameters for what makes sense to us:
- Adopt the provision from the 2023 rule requiring that plans be placed on both the agency and bank websites for a 60-day comment period; and
- Require enhanced community input like how Community Benefits Agreements are currently negotiated.
- If the bank and community agree, streamline the application.
For the bank, this allows them to know exactly what’s expected, how they’re doing, and what’s covered. For examiners, it’s a streamlined process of validating bank data and progress and checking in with community to make sure that their expectations are being met.
Other recurring criticisms include inconsistency in knowing what’s going to receive favorable consideration and what isn’t. Our recommendation is to bring back three resources that had worked relatively well to help with clarity and consistency but, for some reason, were abandoned.
- The first is an interagency version of the OCC’s old directory of community development investments. Update it annually based on exam feedback and evolution in community development finance and then use it as training material for examiners and bankers.
- For those activities that don’t fit cleanly into existing guidance, start writing interpretive letters again, and then get them out to the entire industry to ensure consistency and to save time and angst for everybody.
Finally, another refrain is that exam teams from the same agency can take a completely different approach and find completely different outcomes from one exam to the next.
- Bring back the FFIEC Advanced CRA Examination Techniques training so that experienced examiners can train their peers in the field. Impose continuing education requirements so that their knowledge is constantly being refreshed as the industry and the regulation evolves.
- Many states also have their own CRA laws, including some that cover credit unions. As such, the NCUA and state-level regulators may be interested in the training as well, so the door should be open to them.
One last note, coordinate with your respective CRA teams to ensure that any national discussion concerning the CRA does not conflict with regulatory conferences on CRA, as is the case today.
