Here We Go Again: The Latest Proposed Rule to Implement the Community Reinvestment Act

If this Legal Update gives you déjà vu, it is for good reason. Once again, updates to the regulations implementing the Community Reinvestment Act (“CRA”) have been proposed.¹ This newest flavor sees updates to the CRA regulations only for banks regulated by the Office of the Comptroller of the Currency (“OCC”) and the Federal Deposit Insurance Corporation (“FDIC”), leaving banks regulated by the Federal Reserve (“FRB”) to comply with CRA regulations from 1995.

Since 2020, the prudential regulators have proposed significant overhauls to the CRA regulations, only to abandon or propose rescinding the rulemakings. While nearly all stakeholders agree that the CRA regulations need to be updated to reflect modern banking, there is little agreement on the actual updates. Only last year, the agencies proposed rescinding the majority of the CRA regulations, finalized in 2023 and reverting to the regulatory framework promulgated in 1995. On July 31, 2026, instead of adopting the July 16, 2025 proposed rule that would revert the CRA regulations to the 1995 version, the FDIC and OCC issued a new Notice of Proposed Rulemaking (the “Proposed Rule”) that would significantly update the CRA regulations for depository institutions regulated by the two agencies.

Comments on the Proposed Rule are due on October 13, 2026. This Legal Update summarizes the new proposal.

Background

The CRA, passed in 1977, generally requires insured depository institutions to engage in investment, lending, and service activities that help meet the credit needs of their designated assessment areas—particularly low- and moderate-income (“LMI”) communities and small businesses and farms. Insured depository institutions receive a rating from the banking regulators based on their performance. The CRA also requires the US banking regulators to:

• Encourage banks to meet the credit needs of the communities that they serve in a safe and sound manner and evaluate their record of doing so.
• Take that record into account when evaluating certain banking applications.
• Report to Congress the actions they have taken to carry out their CRA responsibilities.

The US banking regulators issued the first set of regulations to implement the CRA in 1978 and revised them in 1995 and 2005, with the most substantive interagency update occurring in 1995. Given the significant changes to the business of banking, and the methods of offering financial products and services (e.g., less reliance on physical locations for certain banks) since the substantive changes in 1995, the CRA regulations had become outdated. In recent years, the regulators have taken divergent approaches to revising the CRA regulations, with the OCC briefly and unilaterally issuing an amendment in May 2020. The OCC later rescinded that amendment, and the regulators announced their commitment to work together in order to strengthen and update the CRA regulations, providing a more consistent framework across all banks.

In October 2023, the FDIC, FRB, and OCC finalized an overhaul of the regulations implementing the CRA (the “2023 Rule”). That rulemaking was the result of a coordinated interagency effort and would have drastically changed how all but the smallest banks would have been evaluated for compliance with the CRA. The 2023 Rule had an effective date of April 1, 2024, although compliance with most of the substantive provisions was not required until January 1, 2026.

In February 2024, several trade associations sued the FDIC, FRB, and OCC in the U.S. District Court for the Northern District of Texas, alleging the 2023 Rule violated the agencies’ statutory mandate under the CRA. The District Court issued a preliminary injunction in March 2024, finding that the plaintiffs demonstrated a substantial likelihood of success, and enjoining the agencies from enforcing the 2023 Rule against the plaintiffs, as well as extending the effective date of all implementation dates in the rule for each day of the preliminary injunction. The agencies appealed the preliminary injunction to the U.S. Court of Appeals for the Fifth Circuit.

Then, in March 2025, the agencies filed an unopposed motion to stay the appeal pending the completion of new rulemakings that would propose to rescind the 2023 Rule. The agencies issued the proposed rescission on July 16, 2025.² Along with the proposed rescission, the agencies stated that because the 2023 Rule was subject to legal action and had not taken effect, the agencies would continue to apply the rules in effect on March 29, 2024—effectively, the 1995 regulations. In July 2026, the FDIC and OCC filed—and the Fifth Circuit granted—an unopposed motion to dismiss their appeal of the District Court’s preliminary injunction.

FDIC and OCC’s New Proposed Rule

The Proposed Rule, if finalized, would not change the CRA regulations implemented by the FRB, which absent further notice, will continue to apply the 1995 regulations. The FDIC and OCC propose significant changes to the structure of the current 1995 CRA regulations, and the Proposed Rule bears little resemblance to the regulations finalized in 2023.

The FDIC and OCC have stated that they are proposing the changes “in order to better align with the statutory mandate [of the CRA], reduce unnecessary burden, and improve clarity.” They frame these changes as “targeted” and “designed to retain the key elements of the current regulatory framework to provide continuity and minimize disruptions.” Specifically, the FDIC and OCC state in the Proposed Rule that the changes are intended to encourage banks to meet the credit needs of local communities, including by increasing the focus on lending and better ensuring community development (“CD”) grants benefit communities. The agencies also state the changes are intended to address “specific and known challenges” under the current regulations, including better ensuring that CD funding reaches “the communities [it is] intended to benefit instead of being diverted to other activities or excessive operating costs.” While the agencies frame the changes as “targeted” and the structure of the CRA regulations will largely remain in place, the proposed changes would significantly alter CRA compliance for at least some banks.

What Stays the Same?

Unlike the 2023 Rule, much of the structure of the 1995 CRA regulations remains intact under the Proposed Rule. Large banks will remain subject to the same lending, investment, and service tests for retail lending and community development. Small banks and intermediate small banks (which would be called intermediate banks under the Proposed Rule) will remain subject to a tailored lending test and intermediate banks will remain subject to a tailored community development test. Banks will also have the option to be evaluated as a wholesale or limited purpose bank or under a strategic plan. Banks’ current assessment area frameworks will also largely remain the same.

Key Changes

Below, we highlight some of the key changes reflected in the Proposed Rule.

• The Proposed Rule would replace the size threshold category “intermediate small bank” with an “intermediate bank” category.
• The Proposed Rule indicates that the agencies are considering whether to eliminate the category of limited purpose banks.  Because banks would be evaluated based on their consumer lending under the Proposed Rule (assuming that lending is determined to be a major product line for the bank), the limited purpose designation may no longer be needed.
• Asset Thresholds: The Proposed Rule would:
• Increase the asset threshold of a small bank to below $1 billion (up from less than $412 million), or alternatively, to $850 million or below in alignment with the Small Business Administration (“SBA”) standard for commercial banks (to be automatically adjusted when the SBA size threshold changes);
• Increase the asset threshold for intermediate banks to between $1 billion and $10 billion (up from between $412 million and $1.649 billion) or, alternatively, to a threshold cap of $3.252 billion in alignment with the OCC’s 2020 CRA regulations;
• Increase the asset threshold for a large bank to above $10 billion (up from more than $1.649 billion); and
• Unlike the current framework, the intermediate bank and large bank asset thresholds would not be adjusted annually for inflation, and the agencies would instead consider any further adjustments in a future rulemaking. The small bank threshold would continue to be adjusted annually based on changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers.
• Lending Test:
• The Proposed Rule reflects an increased focus on lending activities consistent with the requirements of the CRA. This change reflects the agencies’ view that a community’s credit needs are most directly met through activities that involve lending.
• Under the large bank lending test and the small and intermediate bank lending test, the agencies would consider only a bank’s major product line(s) when assessing its retail lending. The agencies propose two potential options for determining a bank’s major product lines. Under one option, the agencies would use a quantitative, bank-level approach to evaluate a bank’s retail lending in two of the four retail lending product lines, and those would be considered the major product lines. The other option would use an assessment-area-level approach that qualitatively and quantitatively determines major product lines, similar to the current methodology for small and intermediate small banks. Under either approach, the agencies would consider consumer lending to be a major product line only if it constitutes a majority of the bank’s retail lending by both dollar amount and loan count, or at the bank’s option.
• The Proposed Rule would codify that 30 loans are generally sufficient for a meaningful lending-performance assessment but permit the agencies to consider fewer loans where a smaller sample can still support a meaningful assessment. If loan data are insufficient for a meaningful assessment, the agencies would rely on other lending criteria that can be meaningfully assessed or on applicable performance-context factors.
• Service Test:
• The range of services considered “retail banking services” for purposes of the service test would be limited to “credit services.” This change would exclude deposit services and the distribution and availability of an institution’s retail banking facilities, which are currently considered retail banking services.
• Ratings:
• The Proposed Rule would allow an intermediate bank to receive a “satisfactory” or “outstanding” rating if it receives at least a “satisfactory” rating on the lending test.
• Community Development Activities:
• For purposes of determining whether a grant or donation qualifies as a CD activity, banks would only be permitted to receive CRA consideration for grants and donations used directly by the recipient for a program, project, or initiative with a primary purpose of community development in the bank’s local community. Currently, grants and donations are considered qualified investments, but they differ from other types of qualified investments that involve more structured financing and are more akin to lending. For large banks, there would also be a 15% cap on the indirect costs that recipients could incur as part of administering a grant or donation. The Proposed Rule correspondingly sets forth the information a bank must collect from recipients of a CD grant to ensure consideration.
• The Proposed Rule would revise the definition of community development to clarify when loans, investments, grants, and services qualify as CD activities, largely codifying and clarifying existing guidance.
• In a well-received carryover from the 2023 Rule, the Proposed Rule would codify a process under which a bank could seek agency confirmation that an activity would receive consideration as a CD activity and would require the agencies to publish a non-exhaustive illustrative list of examples of CD activities that do and do not qualify for CRA credit.
• The Proposed Rule would allow optional consideration for a CD activity that benefits an area other than the bank’s assessment area when the bank has demonstrated it is sufficiently meeting credit needs in its assessment area. Banks would not be required to conduct CD activities outside of their assessment area to obtain a satisfactory or outstanding rating.
• The term “complexity,” an element of whether an activity is “responsive” to the needs of a bank’s community, would be defined and include CD investments, grants, or services that are a necessary or otherwise beneficial component of a multicomponent financing transaction involving a complex loan, as well as CD lending and certain CD investments that require specialized lending expertise.
• The Proposed Rule would retain the four existing CD categories but define them more specifically.
• Strategic Plan:
• The Proposed Rule would clarify the strategic plan framework to make it a more viable and less burdensome option for banks. This would include clarifying how to submit, amend, and implement a strategic plan and providing additional information regarding the content the plan must contain, particularly with respect to measurable goals.
• Public File and Notice Requirements: The Proposed Rule would:
• No longer require a bank to provide a paper copy of information in its public file;
• Permit a bank to make the information in its public file available on its public website; and
• Allow a bank to satisfy the public notice requirement by identifying the website on which the bank posts information about its CRA performance.

Consideration of Discriminatory Practices

Under current and longstanding rules, an agency’s evaluation of a bank’s CRA performance is adversely affected by evidence of discriminatory or other illegal credit practices. The rules then provide a non-exhaustive list of such practices. In this Proposed Rule, the agencies seek to add to that list of examples of illegal credit practices. Those new examples would include: (1) Section 1031 of the Dodd-Frank Act, which involves unfair, deceptive, or abusive acts or practices; (2) the Military Lending Act; and (3) the Servicemembers Civil Relief Act. When the agencies promulgated the 2023 Rule, they similarly considered adding those statutes to the list of illegal credit practices. The agencies request comments on whether there are additional examples of discriminatory or other illegal credit practices that should be identified.

In the 2023 Rule,³ the agencies also considered whether to expand the provision so that the practices that could adversely affect a bank’s CRA performance would no longer be limited to credit practices but also would include practices related to deposit products or other products or services. However, in the current Proposed Rule, the agencies would stick with practices related to the bank’s credit activities and would attempt to hone the rule so that it focuses on credit practices that would have a broad impact on a bank’s lending activities. The agencies propose two options to address which violations the agencies would consider.

Under the first option, the rule would focus on practices that would be a violation of law, rule, or regulation cited in a public enforcement action by a federal or state agency or judicial order to which a federal or state agency is a party. The agencies’ goal here would be to create an objective standard and one that would permit them to discuss credit practices in their performance evaluations without disclosing confidential supervisory information.

Under the second option, the agencies would essentially codify existing practice, in which an illegal credit practice would include one that is a violation of a law, rule, or regulation cited by a federal or state agency in an examination report or enforcement action, or a judicial order to which a federal or state agency is a party. However, the agencies would not disclose any confidential supervisory information in the public section of a bank’s performance evaluation. The agencies mention that this option would include the flexibility to consider a particularly discriminatory or other illegal credit practice, even if it is not disclosed to the public.

The agencies are also proposing to eliminate the “nature, extent, and strength of the evidence of the practices” factor. Currently, in determining the effect of evidence of discriminatory or other illegal credit practices on the bank’s assigned rating, the agency would consider the “nature, extent, and strength of the evidence of the practices,” among other factors. However, the agencies assert that under their first option, described above, a public agency action or judicial order would necessarily present the requisite “nature, extent, and strength” to warrant lowering a bank’s rating. Even under the second option, the factor would be covered by the agencies’ consideration of “any other relevant information.” The agencies would continue to consider the rule’s other factors: (1) the bank’s policies and procedures to prevent the practices, and (2) any corrective action taken or committed to being taken. Accordingly, the agencies propose that the factor regarding the nature, extent, and strength of the evidence would no longer be necessary.

The agencies also request comments on whether the regulations should provide greater clarity regarding how evidence of discriminatory or other illegal credit practices may affect a bank’s CRA ratings. For example, should the regulations provide that evidence of discriminatory or other illegal credit practices may be considered in the bank’s overall CRA rating, or in the applicable performance test, assessment area, state, or multistate MSA conclusions or ratings?

In the past, the agencies have used illegal credit practices to downgrade banks’ overall CRA ratings by one or two levels. This has resulted in several institutions having CRA ratings of less than “satisfactory” as a result of the downgrade.

Practical Implications

If finalized as proposed, the Proposed Rule would have several significant implications for banks. For one, the asset size threshold increases will result in some banks moving from the more burdensome requirements of the large bank category to the intermediate bank category, or from the intermediate small bank category to the small bank category. In addition, banks may need to significantly reevaluate their activities under the service test. Since retail banking services will be limited to credit services and would no longer include depository services or retail banking facilities, there could be significant implications for banks for which depository services and/or retail banking facilities make up a sizable portion of their service test performance.

The requirements related to CD grants could have several implications. First, depository institutions will be required to collect additional information to receive CRA consideration, and they could have difficulty receiving CRA credit if a recipient exceeds the 15% indirect-cost cap. Moreover, the 15% cap does not appear to account for the varying structures and functions of CD grant recipients that could result in “indirect costs” exceeding 15% while still ultimately serving the CD purpose of the grant. Second, banks’ options for CD grants will be limited by the requirement to provide grants directly to recipients for use in connection with a specific community development project. This could reduce efficiency for banks that currently use intermediaries to distribute CD grants or that provide grants to organizations with a CD-purpose without tying them to a specific project, and it could reduce the availability of grants from depository institutions to nonprofits due to the increased restrictions on obtaining CRA credit.

Several changes are welcome updates. For example, the illustrative list of CD activities and the process for the agencies to assess whether an activity constitutes community development were two of the most well-received changes in the 2023 Rule, and would help depository institutions better understand which activities qualify for CRA consideration. In addition, the changes with respect to public notice and an institution’s CRA public file are welcome changes reflecting advances in technology and access to information since 1995. Further, the additional information provided on strategic plans could result in more depository institutions pursuing strategic plans as an option for CRA evaluation.

Litigation

In the Proposed Rule, the FDIC and OCC state that they are moving the District Court for entry of final judgment against them. If entered, the proposed language would “declare that future amendments to the OCC’s and FDIC’s CRA regulations could neither be based on (1) an expansive view of ‘entire community’ that provides for or permits the assessment of regulated institutions’ retail lending activities outside the geographic areas where they operate and maintain deposit-taking facilities; nor (2) an expansive view of ‘credit needs’ that provides for or permits the assessment of regulated institutions’ deposit products.” If judgment is granted as proposed, the judgment could significantly limit the scope and content of any future CRA regulations under the FDIC and OCC.

Conclusion

While the majority of stakeholders agree that the CRA regulations need significant updates to reflect modern banking, this latest proposal continues to demonstrate the disagreement over how best to accomplish those updates. To be sure, the Proposed Rule includes several much-needed updates to modernize the CRA regulations, including two changes that were welcomed under the 2023 Rule. However, because the last attempt at non-interagency CRA reform was abandoned, and because the 2023 CRA regulations were proposed to be rescinded under the next presidential administration, the durability of this attempt is unclear. One factor in its favor is that the proposed changes, while substantial, build on the current regulations, in contrast to the complete overhaul and restructuring of categories, tests, assessment areas, and more under the 2023 Rule. If finalized, these changes would likely be easier to amend in the future, even with a change in administration, and less likely to be completely rescinded like the 2023 Rule. With a comment deadline of October 13, 2026, the Proposed Rule is unlikely to be finalized in 2026.

¹ OCC, FDIC, Community Reinvestment Act Regulations, 91 Fed. Reg. 52,114 (Aug. 12, 2026).

² OCC, FRB, FDIC, Community Reinvestment Act Regulations, 90 Fed. Reg. 34,086 (July 18, 2025).

³ Although the agencies issued the final rule in 2023, it was published in the Federal Register in 2024. 89 Fed. Reg. 6,574 (Feb. 1, 2024), as supplemented and corrected at 89 Fed. Reg. 22,060 (March 29, 2024).