[Congressional Record Volume 143, Number 1 (Tuesday, January 7, 1997)]
[Extensions of Remarks]
[Page E72]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




               CREDIT OPPORTUNITY AMENDMENTS ACT OF 1997

                                 ______
                                 

                           HON. BILL McCOLLUM

                               of florida

                    in the house of representatives

                        Tuesday, January 7, 1997

  Mr. McCOLLUM. Mr. Speaker, today I rise to reintroduce the Credit 
Opportunity Amendments Act which will fundamentally reform the 
Community Reinvestment Act [CRA] of 1977, and clarify the enforcement 
of our fair lending laws.
  The original purpose of CRA was to encourage banks to loan into the 
communities in which they maintained deposit taking facilities.
  In addition, the Members of the 95th Congress were concerned about 
redlining, the practice of denying loans in certain neighborhoods based 
on racial or ethnic characteristics. The enforcement mechanism chosen 
was to have CRA performance taken into account when regulators were 
deciding on applications by the banks.
  When CRA passed in 1977, the Senate report stated that no new 
paperwork would be required under the new law. It was believed that 
examiners had all the information they needed on hand from call reports 
and their examination reports to enforce CRA. This is not the case. 
Instead of relying on existing information, regulators have created 
expansive new reporting requirements resulting in mounds of additional 
paperwork and many wasted hours that could have been used to serve the 
community.
  CRA's enforcement mechanism has gone completely haywire. It has 
become what many refer to as regulatory extortion. By holding up 
applications on the basis of CRA protests, some community groups hope 
to get sizable grants or other contracts from banks. This happens all 
too often.
  Recently, the Clinton administration has linked the enforcement of 
CRA with other fair lending statutes. This has placed the Justice 
Department in the position of being an additional bank regulator. This 
new bank regulator caught the lending industry off guard by using the 
disparate impact test for proving discrimination. Disparate impact is a 
controversial theory for proving discrimination in employment law 
purely using statistical data. Under this scenario, a lender can be 
found to have discriminated without some element of intent or without 
proving that any harm resulted from a lending practice.
  This legislation remedies these problems while ensuring that lenders 
reinvest in the communities in which they serve. First, it replaces the 
current system of enforcement and graded written evaluations with a 
public disclosure requirement. This will dramatically reduce 
unnecessary paperwork and end the extortion-like nature of the current 
enforcement mechanism.
  This approach allows bank customers to decide whether the bank is 
doing an adequate job in meeting its community obligations; not 
bureaucrats in Washington or organized community groups. If not, 
consumers can take their business elsewhere.
  This will not end the congressional requirement that banks invest in 
their community. Nor will it stop organized groups from being involved. 
They will have the enforcement from the public disclosure on the bank's 
intentions and performance. They can raise any concerns with the bank 
or the regulators at any time. Consumers and the groups representing 
their interests can make their concerns known without having the 
extraordinary authority to hold up mergers and other obligations.
  The second change in this bill makes the practice of redlining a 
violation of the Equal Credit Opportunity Act and the Fair Housing Act. 
Redlining will be defined as failing to make a loan based on the 
characteristics of the neighborhood where the house or business is 
located. Currently no prohibition against redlining in fair housing or 
fair lending exists, however, courts have interpreted these statutes to 
prohibit redlining. By placing a prohibition on redlining in statute, 
we will be sending a clear message that we are opposed to 
discrimination in lending in all forms, whether based on an 
individual's race, gender, age, sex, or makeup of the neighborhood 
where the individual lives or works.
  This will also clarify that the method chosen to enforce our 
antidiscrimination laws is clear and resides in the fair housing and 
lending laws. No longer will regulators be forced to confront laws to 
attempt to address problems that the laws are inadequate for the 
purpose.
  Third, the Credit Opportunity Amendment Act adds two criteria to the 
current use of the disparate impact theory. First, it requires 
regulators show actual proof that the lender discriminated and that the 
discrimination caused harm to the victim. Second, this legislation 
requires the party bringing suit to prove the lender intended to 
discriminate when making its lending criteria.
  Finally, by designating a lead regulator to enforce our fair lending 
and community reinvestment statutes, we will have more even-handed 
enforcement of these laws. In turn, banks will be in a better position 
to know how to comply with them. Currently, confusion is the most 
prevailing reaction to the enforcement of CRA over the last 15 years 
and fair lending more recently.
  The current bill makes substantial reforms to CRA which I strongly 
support. By enacting this legislation, we make a bold step to eliminate 
credit allocations in the guise of CRA and rationalize our regulation 
of the banking industry. At the same time, we make it absolutely clear 
that redlining is unacceptable and is against the law. Therefore, Mr. 
Speaker, I urge my colleagues to support my legislation in the 105th 
Congress.