[Federal Register Volume 75, Number 191 (Monday, October 4, 2010)]
[Rules and Regulations]
[Pages 61035-61046]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-24737]



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  Federal Register / Vol. 75, No. 191 / Monday, October 4, 2010 / Rules 
and Regulations  

[[Page 61035]]



DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 25

[Docket ID OCC-2010-0014]
RIN 1557-AD24

FEDERAL RESERVE SYSTEM

12 CFR Part 228

[Docket No. R-1360]

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 345

RIN 3064-AD45

DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Part 563e

[Docket ID OTS-2010-0023]
RIN 1550-AC35


Community Reinvestment Act Regulations

AGENCIES: Office of the Comptroller of the Currency, Treasury (OCC); 
Board of Governors of the Federal Reserve System (Board); Federal 
Deposit Insurance Corporation (FDIC); Office of Thrift Supervision, 
Treasury (OTS).

ACTION: Joint final rule.

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SUMMARY: The OCC, Board, FDIC, and OTS (collectively, ``the Agencies'') 
are issuing this joint final rule, which revises our rules implementing 
the Community Reinvestment Act (CRA). The rule implements the statutory 
requirement that the Agencies consider low-cost education loans 
provided by the financial institution to low-income borrowers as a 
factor when assessing an institution's record of meeting community 
credit needs. The final rule also incorporates the statutory provision 
that allows the Agencies to consider capital investment, loan 
participation, and other ventures undertaken by nonminority-owned and 
nonwomen-owned financial institutions in cooperation with minority- and 
women-owned financial institutions and low-income credit unions as a 
factor when assessing an institution's CRA record.

DATES: Effective Date: November 3, 2010.

FOR FURTHER INFORMATION CONTACT:
    OCC: Margaret Hesse, Special Counsel, Community and Consumer Law 
Division, (202) 874-5750; or Gregory Nagel, National Bank Examiner, 
Compliance Policy, (202) 874-4428, Office of the Comptroller of the 
Currency, 250 E Street, SW., Washington, DC 20219.
    Board: Rebecca Lassman, Supervisory Consumer Financial Services 
Analyst, (202) 452-2080; or Brent Lattin, Senior Attorney, (202) 452-
3667, Division of Consumer and Community Affairs, Board of Governors of 
the Federal Reserve System, 20th Street and Constitution Avenue, NW., 
Washington, DC 20551.
    FDIC: Janet R. Gordon, Senior Policy Analyst, Division of 
Supervision and Consumer Protection, Compliance Policy Branch, (202) 
898-3850; or Susan van den Toorn, Counsel, Legal Division, (202) 898-
8707, Federal Deposit Insurance Corporation, 550 17th Street, NW., 
Washington, DC 20429.
    OTS: Stephanie M. Caputo, Senior Compliance Program Analyst, 
Compliance and Consumer Protection, (202) 906-6549; or Richard Bennett, 
Senior Compliance Counsel, Regulations and Legislation Division, (202) 
906-7409, Office of Thrift Supervision, 1700 G Street, NW., Washington, 
DC 20552.

SUPPLEMENTARY INFORMATION:

Background

    The Community Reinvestment Act (CRA) requires the federal banking 
and thrift regulatory agencies to assess the record of each insured 
depository institution (hereinafter, ``institution'') in meeting the 
credit needs of its entire community, including low- and moderate-
income neighborhoods, consistent with the safe and sound operation of 
the institution, and to take that record into account when the agency 
evaluates an application by the institution for a deposit facility.\1\ 
The Agencies have promulgated substantially similar regulations to 
implement the requirements of the CRA.\2\
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    \1\ 12 U.S.C. 2903.
    \2\ See 12 CFR parts 25 (OCC), 228 (Board), 345 (FDIC), and 563e 
(OTS).
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Notice of Proposed Rulemaking

    On June 30, 2009, the Agencies published a joint notice of proposed 
rulemaking that would incorporate two statutory requirements into the 
CRA regulations.\3\ The first revision would implement section 1031 of 
the Higher Education Opportunity Act, Public Law 110-315, 122 Stat. 
3078 (August 14, 2008) (the ``HEOA''), which amended the CRA. This 
provision requires the Agencies to consider low-cost education loans 
provided by the institution to low-income borrowers as a factor when 
evaluating an institution's record of meeting community credit needs. 
12 U.S.C. 2903(d). The second revision would incorporate 12 U.S.C. 
2903(b), which allows the Agencies to consider and take into account 
nonminority- and nonwomen-owned financial institutions' activities in 
connection with minority- and women-owned financial institutions and 
low-income credit unions.
---------------------------------------------------------------------------

    \3\ 74 FR 31209 (Jun. 30, 2009).
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    Twenty-four different commenters provided their views to the 
Agencies on the proposed revisions. The commenters represented 
financial institutions, financial institution trade organizations, 
community or consumer organizations, and others.

Low-Cost Education Loans to Low-Income Borrowers

Background and General Comments

    Under existing CRA regulations, education loans are evaluated as 
consumer loans.\4\ An institution's consumer lending must be evaluated 
if consumer lending makes up a substantial majority of an institution's 
business. Institutions that do not meet

[[Page 61036]]

this criterion may choose to have consumer loans evaluated when the 
institution's CRA record is being examined. Institutions must collect 
and maintain data about consumer loans if they choose to have those 
loans evaluated.\5\ Like other consumer loans, institutions' education 
loans are generally evaluated by total number and amount; borrower 
characteristics (i.e., distribution among borrowers of different income 
levels); geographic distribution (i.e., distribution among borrowers in 
geographies with different income levels and whether the loans are made 
to borrowers in the institution's assessment areas); and, for large 
retail institutions, whether the education loan program is innovative 
or flexible in addressing the credit needs of low- or moderate-income 
individuals or geographies.\6\ This revised rule does not change the 
eligibility of education loans to be treated as consumer loans. Rather, 
the revised rule amends the general performance rules in 12 CFR 25.21, 
228.21, 345.21, and 563e.21 to implement the requirements of section 
1031 of the HEOA. If an institution's education loans do not qualify 
for CRA consideration under section 1031 of the HEOA and this 
implementing rule, the institution continues to be able to receive 
consideration under existing standards applicable to consumer loans.
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    \4\ ``Consumer loan'' is defined in the CRA regulations as a 
loan to one or more individuals for household, family, or other 
personal expenditures. Consumer loans include the following 
categories of loans: motor vehicle loans, credit card loans, home 
equity loans, other secured consumer loans, and other unsecured 
consumer loans. 12 CFR 25.12(j), 228.12(j), 345.12(j), and 
563e.12(j).
    \5\ See 12 CFR 25.22(a)(1) and 25.42(c); 12 CFR 228.22(a)(1) and 
228.42(c); 12 CFR 345.12(a)(1) and 345.42(c); and 12 CFR 
563e.22(a)(1) and 563e.42(c).
    \6\ See, e.g., 12 CFR 25.22 and 25.26; 228.22 and 228.26, 345.22 
and 345.26, and 563e.22 and 563.26.
---------------------------------------------------------------------------

    Section 1031 of the HEOA revised the CRA to require the Agencies to 
consider low-cost education loans provided by the institution to low-
income borrowers as a factor when evaluating an institution's record of 
meeting community credit needs.\7\ The legislative history indicates 
that the provision was intended to provide incentives for lenders to 
provide low-cost education loans to low-income borrowers.\8\
---------------------------------------------------------------------------

    \7\ 12 U.S.C. 2903(d).
    \8\ H.R. Rep. No. 110-500 at 297 (2007). See also Private 
Student Lending: Hearing before the Senate Comm. on Banking, 
Housing, and Urban Affairs, 110th Cong. (2007) (comment by Sen. 
Dodd: ``It strikes me that we should be promoting, of course, 
incentives for lenders to provide the neediest students with good 
loans, loans, in my mind, that are similar in rate and fee structure 
to those under the federal loan program.'') (transcript available 
through CQ Congressional Transcripts, Congressional Hearings, Jun. 
6, 2007).
---------------------------------------------------------------------------

    Consistent with the supplemental information accompanying the 
proposed rule, under the final rule as implemented by the Agencies, 
institutions will receive favorable qualitative consideration for 
originating ``low-cost education loans to low-income borrowers'' as a 
factor in the institutions' overall CRA rating. Such loans would be 
considered responsive to the credit needs of the institutions' 
communities.\9\
---------------------------------------------------------------------------

    \9\ 74 FR at 31214.
---------------------------------------------------------------------------

The Proposal

    The Agencies proposed to consider low-cost education loans provided 
by the institution to borrowers in its assessment area(s) who have an 
individual income that is less than 50 percent of the area median 
income. Further, the Agencies proposed to define ``low-cost education 
loans'' to mean (1) education loans originated by an institution 
through a U.S. Department of Education loan program; or (2) any private 
education loan as defined in the Truth in Lending Act, including loans 
under a state or local education loan program, originated by an 
institution for a student at an ``institution of higher education,'' 
with interest rates and fees no greater than those of comparable 
education loans offered through loan programs of the U.S. Department of 
Education.
    Under the first prong of the proposed definition, any loans that 
institutions make through a Department of Education loan program, such 
as the Federal Family Education Loan (FFEL) Program, would be 
considered ``low-cost education loans.''
    Under the second prong of the proposed definition, ``private 
education loans'' that institutions make would be considered ``low-cost 
education loans,'' provided that the interest rates and fees are no 
greater than those of comparable education loans offered through loan 
programs of the U.S. Department of Education.
    The Agencies also proposed a conforming amendment to Appendix A of 
the regulations to include consideration of a financial institution's 
low-cost education loans to low-income borrowers as a factor when 
assigning a rating to the institution.
    The Agencies asked for comment on a number of areas related to the 
proposed definition.

General Comment About Education Lending by Financial Institutions

    Several commenters noted that education lending, particularly 
private education lending, is a specialized type of lending engaged in 
by only a few financial institutions. These commenters requested that 
the Agencies expressly state that the final rule does not require 
institutions to make low-cost education loans, or, for that matter, 
education loans generally. The Agencies agree that the intent of the 
revision is to encourage, but not to require, financial institutions to 
make low-cost education loans to low-income borrowers and provide an 
incentive to do so.

Scope of ``Education Loans''

Education Loans--The Proposal

    The HEOA amendment to the CRA specifies that the Agencies must 
consider low-cost ``education loans'' to low-income borrowers.\10\ The 
Agencies proposed to define education loans as including loans 
originated by financial institutions through a program of the U.S. 
Department of Education. The Agencies also proposed to define education 
loans to include low-cost private education loans, including loans 
under State or local education loan programs.
---------------------------------------------------------------------------

    \10\ 12 U.S.C. 2903(d) (as added by section 1031 of the HEOA).
---------------------------------------------------------------------------

    As discussed in the preamble to the proposed rule, in defining 
private education loans, the Agencies proposed to adopt the terms 
``private education loan,'' ``private educational lender,'' and 
``postsecondary educational expenses,'' each of which is defined in the 
HEOA in the context of the Truth in Lending Act (TILA). Section 1011 of 
the HEOA added section 140 of TILA to provide the following definition:

    [T]he term ``private education loan''--
    (A) Means a loan provided by a private educational lender that--
    (i) Is not made, insured, or guaranteed under title IV of the 
Higher Education Act of 1965 (20 U.S.C. 1070 et seq.); and
    (ii) Is issued expressly for postsecondary educational expenses 
to a borrower, regardless of whether the loan is provided through 
the educational institution that the subject student attends or 
directly to the borrower from the private educational lender; and
    (B) Does not include an extension of credit under an open end 
consumer credit plan, a reverse mortgage transaction, a residential 
mortgage transaction, or any other loan that is secured by real 
property or a dwelling.\11\
---------------------------------------------------------------------------

    \11\ Section 140(a)(7) of the Truth in Lending Act, as added by 
section 1011 of the HEOA.
---------------------------------------------------------------------------

    In turn, the HEOA defines a ``private educational lender'' to 
include, among others, any financial institution that solicits, makes, 
or extends private education loans.\12\
---------------------------------------------------------------------------

    \12\ Section 140(a)(6)(A) of the Truth in Lending Act, as added 
by section 1011 of the HEOA.
---------------------------------------------------------------------------

    The HEOA defines ``postsecondary educational expenses'' to mean any 
of the expenses that are included as part of the cost of attendance of 
a student, as defined under section 472 of the Higher Education Act of 
1965 (20 U.S.C. 1087ll). That definition includes tuition and fees, 
books, supplies, miscellaneous personal expenses, room and board, and

[[Page 61037]]

an allowance for any loan fee, origination fee, or insurance premium 
charged to a student or parent for a loan incurred to cover the cost of 
the student's attendance.\13\
---------------------------------------------------------------------------

    \13\ See 20 U.S.C. 1087ll (definition of ``cost of 
attendance'').
---------------------------------------------------------------------------

    Although section 1031 of the HEOA is not expressly limited to loans 
for higher education, the Agencies proposed to include this limitation 
in the definition of low-cost private education loans. Thus, the 
Agencies proposed that the private education loan definition would 
encompass loans made for expenses incurred at any ``institution of 
higher education'' as that term is generally defined in sections 101 
and 102 of the Higher Education Act of 1965 (HEA), 20 U.S.C. 1001 and 
1002. Such institutions generally include accredited public or 
nonprofit colleges and vocational schools, accredited private colleges 
and vocational schools, and certain foreign institutions offering 
postsecondary education that are comparable to institutions of higher 
education in the United States based on standards approved by the U.S. 
Department of Education. The Agencies did not propose to cover 
unaccredited colleges, universities, or vocational schools because they 
lacked sufficient information regarding these institutions, but 
solicited comment on this issue.
    Based on these definitions and considerations, under the proposed 
rule, financial institutions would receive CRA consideration for making 
private (non-Federal) closed-end education loans, not secured by real 
property or a dwelling, for post-secondary educational expenses at an 
institution of higher education. They would also receive consideration 
for making education loans through a program of the U.S. Department of 
Education.

Comments and Final Rule

    As discussed above, the Agencies proposed to define education loans 
as including loans originated by financial institutions through a 
program of the U.S. Department of Education, such as the Federal Family 
Education Loan (FFEL) Program. As of July 1, 2010, no new loans may be 
made or insured under the FFEL program, and no new funds may be 
appropriated or expended to make or insure such loans.\14\ Thus, the 
final rule does not include in the definition of education loans any 
reference to the FFEL program.
---------------------------------------------------------------------------

    \14\ Health Care and Education Reconciliation Act of 2010, 
Public Law 111-152 (2010).
---------------------------------------------------------------------------

    The proposed definition of ``private education loan'' included only 
loans made for post-secondary (beyond high school) educational 
expenses, not for primary or elementary education. The Agencies sought 
comment on whether coverage should be limited in this manner. Most 
commenters who addressed the issue, including financial institutions, 
trade associations, and community groups, supported the Agencies' 
proposal to limit the definition of private education loans to loans 
made for post-secondary education expenses. These commenters agreed 
that the amendment to the CRA statute should be viewed in light of the 
HEOA's overall purpose of promoting post-secondary education 
affordability. One trade association supported the proposal, but 
encouraged the Agencies to consider expanding the scope at a later time 
to include vocational and career training.\15\ One financial 
institution suggested that coverage should be as broad as possible and 
should include all types of education, including primary and secondary 
education.
---------------------------------------------------------------------------

    \15\ The Agencies note, however, that many such institutions are 
covered under the definition of ``institution of higher education'' 
discussed below, and loans to their students could qualify for CRA 
consideration under this provision if other applicable criteria are 
met.
---------------------------------------------------------------------------

    The final rule covers only loans made for higher education 
expenses, not for primary or secondary education expenses. As the 
preamble to the proposed rule explained, the statutory requirement to 
consider education loans under the CRA was adopted as a part of the 
HEOA, which specifically addresses higher education reform. The purpose 
of H.R. 4137, which introduced the incentive of CRA consideration for 
low-cost education loans was ``to make college more affordable and 
accessible;'' to ``expand college access and support for low-income and 
minority students;'' and to provide incentives for lenders to provide 
``low-cost private student loans to low-income borrowers.'' \16\
---------------------------------------------------------------------------

    \16\ H.R. Rep. No. 110-500 at 203, 297 (2007) (emphasis added).
---------------------------------------------------------------------------

Higher Education Institutions--The Proposal

    In defining the types of higher education institutions covered, the 
Agencies proposed to include ``institutions of higher education'' as 
defined in sections 101 and 102 of the HEA, 20 U.S.C. 1001-1002. The 
Agencies requested comment on whether the scope of the definition 
should be narrowed to encompass only loans made for education expenses 
at an ``institution of higher education'' as that term is defined for 
general purposes in section 101 of the HEA, 20 U.S.C. 1001, which is 
limited generally to accredited public and nonprofit colleges, 
universities, and employment training schools in the United States.\17\ 
The Agencies also requested comment on whether, alternatively, the 
scope of the educational institutions covered should be expanded to 
include unaccredited institutions that would not meet the definition of 
``institution of higher education'' under the HEA but would be covered 
by the definition of ``covered educational institution'' under TILA 
section 140(a)(1).
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    \17\ If the Agencies were to restrict the definition of 
``institution of higher education'' to only those institutions 
defined in section 101 of the HEA, loans to cover educational 
expenses at for-profit institutions of higher education, some post-
secondary vocational institutions that provide training to prepare 
students for employment in a recognized occupation, and some U.S. 
Department of Education-approved institutions located outside the 
United States would not qualify for consideration.
---------------------------------------------------------------------------

Comments and Final Rule

    Commenters generally opposed using the narrower definition of 
``institution of higher education'' found in section 101 of the HEA 
because it would exclude some institutions providing vocational and 
career training. The Agencies agree that, consistent with the HEOA's 
purpose, eligible schools should include the broad range of accredited 
institutions under the definition of ``institution of higher 
education,'' including accredited vocational institutions that provide 
educational programs that prepare students for gainful employment in a 
recognized profession.
    Community group commenters opposed expanding coverage to include 
unaccredited institutions, citing a concern about providing CRA credit 
for student loans to finance inadequate, unaccredited training 
programs. Financial institution and trade group commenters were split. 
Those who supported the proposal expressed similar concerns that 
degrees from unaccredited institutions may not be acceptable for 
certain positions such as federal or state civil service positions or 
other employment. One commenter did, however, request that the Agencies 
publish a list of accredited programs.\18\ By contrast, commenters who 
supported expanding coverage to include

[[Page 61038]]

unaccredited institutions encouraged the Agencies to provide maximum 
flexibility to financial institutions to provide a wide range of 
education loans.
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    \18\ The Agencies note that the U.S. Department of Education 
provides a database of post-secondary educational institutions and 
programs that are, or were, accredited by an accrediting agency or 
state approval agency recognized by the Secretary of Education as a 
``reliable authority as to the quality of postsecondary education'' 
within the meaning of the HEA at http://ope.ed.gov/accreditation. 
The Department of Education recommends that the database be used as 
one source of qualitative information and that additional sources of 
qualitative information be consulted.
---------------------------------------------------------------------------

    The Agencies are adopting the scope of higher education 
institutions as proposed. As noted above, the Agencies believe that the 
broader definition of ``institution of higher education,'' including 
accredited vocational institutions, provides flexibility to financial 
institutions, while limiting the definition to accredited institutions 
will help ensure that such programs benefit students. The Agencies will 
consider, as a factor, low-cost education loans to low-income borrowers 
to attend institutions of higher education, as defined in sections 101 
and 102 of the HEA, 20 U.S.C. 1001-1002, when evaluating a financial 
institution under the CRA.

Private Education Loans--The Proposal

    As discussed above, the Agencies proposed to consider low-cost 
private education loans made to low-income borrowers, as well as loans 
provided to low-income borrowers by a financial institution under a 
Federal education program. The Agencies requested comment on whether 
private education loans not made, insured, or guaranteed under a 
Federal, state, or local education program should be considered for CRA 
purposes.

Comments and Final Rule

    Although one commenter stated that private education loans should 
not be considered because a private loan to a student may not guarantee 
that the funds are used for education, many commenters strongly 
believed that private loans should be considered. In fact, several 
commenters noted that if then pending legislation in Congress were 
passed, private lenders would no longer be involved in Department of 
Education loan programs.\19\
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    \19\ H.R. 3221, 111th Cong., 1st Sess. (2009).
---------------------------------------------------------------------------

    These commenters noted that many students and families are unable 
to cover the full cost of an education relying only on government 
programs and may need to pursue other types of funding to complete 
their education. Consequently, these commenters encouraged the Agencies 
to allow CRA consideration for non-governmental low-cost private 
education loans. The Agencies note that the HEOA's purpose was, in 
significant part, to provide an incentive to financial institutions to 
provide low-cost private education loans to low-income borrowers not 
currently served by education loan programs.
    The Agencies also considered whether CRA consideration is necessary 
for loans made by financial institutions under the Federal education 
programs. Federal program education loans generally subjected an 
institution to little or no risk and, therefore, already provided an 
incentive to lenders. However, because as of July 1, 2010, financial 
institutions may no longer originate education loans under the Federal 
program,\20\ the final rule does not provide for CRA consideration of 
such loans under Sec.  1031 of HEOA. However, if an institution has 
made education loans under the Federal program, it would be able to 
receive consideration for those loans under existing standards 
applicable to consumer loans.
---------------------------------------------------------------------------

    \20\ Title II, Health Care and Education Reconciliation Act of 
2010, Public Law 111-152 (2010).
---------------------------------------------------------------------------

State or Local Government-Sponsored Education Loans--The Proposal

    The Agencies proposed to treat education loans offered to low-
income borrowers under state or local government education programs the 
same as all other private education loans, consistent with the 
definition of ``private education loans'' in section 140(a)(7) of the 
Truth in Lending Act, which includes education loans made by financial 
institutions under local and state education loan programs. The 
Agencies asked whether all education loans offered to low-income 
borrowers under state or local education programs, regardless of 
whether the fees and rates are greater than those under comparable 
Department of Education programs, should be eligible for CRA 
consideration.

Comments and Final Rule

    Only three commenters addressed this question. One commenter 
advised that the Agencies should use consistent measures among all 
private education loan programs, without favoring state and local 
programs. A second commenter believed that rates and fees on loans made 
by an institution under state or local education programs would not 
have to be exactly the same, but should be reasonably comparable to 
rates and fees on loans made under the Department of Education 
programs. The third commenter believed that all education loans offered 
to low-income borrowers and families under state or local programs, 
regardless of whether the rates and fees are comparable to those under 
Department of Education programs, should be eligible for CRA 
consideration.
    After a review of the comments, the Agencies have adopted the 
language in the provision regarding state or local education programs 
as proposed. The Agencies are not aware of any state or local education 
loan programs that are targeted or available to low-income students in 
which costs are limited in a manner similar to the Federal direct loan 
program, and for which an alternative definition of ``low-cost'' might 
be appropriate.

Types of Loans--The Proposal

    The proposed definition of a private education loan was limited to 
closed-end loans not secured by real property or a dwelling originated 
by a financial institution.

Comments and Final Rule

    Community group commenters supported limiting coverage in this 
manner noting a concern about using a home as collateral for an 
education loan. One financial institution commenter also supported the 
proposed limitation, noting that there may be operational difficulties 
determining whether a dwelling-secured loan was used for educational 
expenses. By contrast, other financial institution and trade group 
commenters encouraged the Agencies to broaden the scope of the private 
education loan definition to include open-end or dwelling-secured 
credit, noting that consumers use these types of credit to fund 
educational expenses. These commenters requested that the Agencies 
provide flexibility to financial institutions by including such types 
of credit.
    The definition of education loan in the final rule incorporates the 
TILA definition of that term, which excludes open-end credit and credit 
secured by real property or a dwelling. As discussed more fully below, 
the HEOA amended both the CRA to provide an incentive for financial 
institutions to make low-cost education loans and TILA to provide for 
new disclosures and additional consumer protections for private 
education loans. The Agencies believe that in order for financial 
institutions to receive consideration under the CRA for an education 
loan, it is appropriate that such loans also be covered by the new 
disclosures and other substantive restrictions added to TILA by the 
HEOA. Therefore the Agencies are adopting the definition of private 
education loan as used in section 140(a)(7) of TILA.
    Some community group commenters suggested that the Agencies place 
further conditions on the types of loans that could be eligible for CRA 
consideration. For example,

[[Page 61039]]

commenters suggested that the Agencies provide consideration only for 
loans that meet a standard of affordability and provide certain 
consumer protections such as income-based repayment plans, fixed 
interest rates, and no prepayment penalties.
    The final rule does not impose additional restrictions on education 
loans for purposes of CRA consideration because the Agencies have 
limited the types of loans eligible for CRA consideration to those 
covered under the new TILA protections in the HEOA. For example, the 
HEOA requires that consumers receive disclosures regarding private 
education loans that explain the terms and costs of those loans on or 
with an application, after the consumer is approved for the loan, and 
before funds are disbursed. The disclosures also provide consumers with 
information about federal student loan alternatives where applicable. 
Consumers are provided 30 days after a private education loan is 
approved in which to accept the offer and the lender is prohibited, 
with few exceptions, from making changes to the rate or terms of the 
loan during that time. Consumers are also provided with three days in 
which to cancel a loan after receiving the final TILA disclosure.\21\ 
In addition, the HEOA places restrictions on private education loan 
terms and on private educational lenders. For example, the HEOA 
specifically prohibits prepayment penalties for private education 
loans. The HEOA also amended TILA to prohibit practices such as revenue 
sharing and co-branding between private educational lenders and 
educational institutions.\22\
---------------------------------------------------------------------------

    \21\ Section 128(e) of the Truth in Lending Act, as added by 
section 1021 of the HEOA.
    \22\ Section 140(e) of the Truth in Lending Act, as added by 
section 1011 of the HEOA.
---------------------------------------------------------------------------

    The Agencies also requested comment on whether to limit 
consideration to loans originated by the financial institution, as 
proposed, or to consider loans purchased by the institution. Community 
group commenters opposed providing consideration for purchased loans, 
stating a concern that purchasing loans does not significantly expand 
the capacity of financial institutions to offer additional loans. By 
contrast, financial institution commenters supported allowing 
consideration for purchased loans, consistent with other types of CRA-
eligible loans.
    The final rule limits consideration to low-cost education loans 
originated by the financial institution, and not to purchased loans. As 
discussed above, the Agencies believe that the intent of the HEOA 
amendment to the CRA was to provide an incentive to financial 
institutions to originate loans to low-income borrowers currently not 
reached by most private loan programs. The Agencies believe that 
providing consideration only for loans originated by the financial 
institution provides an incentive to financial institutions to develop 
education loan programs that are tailored to the specific need targeted 
by the statutory amendment.

``Low-Cost Education Loans''

The Proposal

    The Agencies proposed to define ``low-cost education loans'' as 
education loans that are originated by financial institutions through a 
program of the U.S. Department of Education; or any private education 
loans, including loans under state or local education loan programs, 
originated by financial institutions with interest rates and fees no 
greater than those of comparable education loan programs offered by the 
U.S. Department of Education.
    The proposal would have looked to guaranteed education loans 
provided by financial institutions through the U.S. Department of 
Education's Federal Family Education Loan Program (FFEL loans) as being 
the comparable education loan program.

Comments and Final Rule

    The Agencies asked whether the proposed definition of the term 
``low-cost education loans'' is appropriate and, if not, how the 
Agencies should define ``low-cost education loans.'' Commenters 
representing community organizations generally agreed with the proposed 
definition that private education loans receiving CRA consideration 
should have interest rates and fees no greater than comparable loans 
offered through the Department of Education. In fact, the same 
commenters stated that, to maintain consistency with the purpose of the 
HEOA to make college affordable, the lowest rates and fees should be 
used.
    Although commenters representing financial institutions and their 
trade organizations generally agreed that loans made by financial 
institutions under Department of Education programs should be 
considered low-cost, they raised concerns about requiring the rates and 
fees on private education loans to be comparable to the rates and fees 
applicable to Department of Education loans. In particular, they noted 
the substantial differences between loans made by financial 
institutions under Department of Education programs and private 
education loans in terms of risks, costs, and pricing. For example, 
commenters noted that FFEL education loans have a 97 percent guarantee 
against default and that a lender's yield is not tied to the fixed 
interest rate paid by the borrower, but rather is based on a separate 
formula set in statute. By contrast, private education loans generally 
have a variable rate determined by an index, such as Prime or one- or 
three-month LIBOR, and a margin, which typically varies depending on a 
borrower's creditworthiness. In addition, the lender assumes all of the 
risk of default on a private education loan.
    Several of the commenters representing financial institutions or 
their trade groups suggested that the Agencies should develop a 
formula, based on an index and a margin, to define low-cost, variable 
rate private education loans. Commenters suggested one-month or three-
month LIBOR or Prime as possible rates to use as an index. Margin 
suggestions varied from three to eight percent. Commenters also 
suggested that upfront fees of up to four percent would be appropriate.
    The Agencies also asked how to determine whether a private 
education loan is comparable to a Department of Education loan and 
whether the lowest or highest rate and fees available under the 
comparable Department of Education program should be used to determine 
whether a private education loan is low cost. Although few commenters 
addressed these questions, the views of the commenters that did respond 
were mixed. Commenters suggested both that it is necessary to use the 
lowest rates and fees, as well as that the higher rate should serve as 
the maximum permissible rate for private loans. Industry commenters 
reasserted that it is not appropriate to evaluate whether a private 
education loan is ``low-cost'' based on rates and fees applicable to 
federal education loans.
    The Agencies have considered these comments carefully. The Agencies 
considered various options with regard to a definition of a ``low-
cost'' private education loan that could address these concerns. For 
example, the Agencies considered whether a low-cost private education 
loan should be defined with a rate that is 100 to 300 basis points over 
a Federal loan rate. However, we did not receive comments that 
identified a standard benchmark, margin, or number of basis points to 
be used as an alternative formula for ``low cost.''
    After consideration of the comments and recent changes in the law 
described above, the Agencies have revised the rule to refer solely to 
the Federal direct loan program of the U.S. Department of

[[Page 61040]]

Education as the benchmark for ``low cost'' education loans.
    To determine whether education loans have rates and terms that are 
no greater than the rates and terms on loans made under the Federal 
direct loan program, education loans will be compared with comparable 
direct loans. For example, fixed-rate loans will be compared to fixed-
rate Federal loans, variable-rate loans will be compared to variable-
rate Federal loans, loans to students will be compared to Federal loans 
to students, and loans to parents will be compared to Federal loans to 
parents. The Agencies note that most education loans originated by 
financial institutions have a variable rate.
    The direct loan program formally called the William D. Ford Federal 
Direct Loan Program is the program against which the rates and fees of 
private education loans must be compared.\23\ The rates and fees that 
have been allowed under the FFEL program, which the preamble of the 
proposal explained was a ``comparable U.S. Department of Education 
program,'' are statutorily specified and are very similar to the rates 
and fees charged to borrowers under the William D. Ford Direct Loan 
Program, which are also statutorily prescribed. The fixed rates under 
the Federal direct loan program that the agencies will use as 
benchmarks are the rates for unsubsidized direct Stafford loans for 
students and direct PLUS loans for parents.\24\
---------------------------------------------------------------------------

    \23\ See 20 U.S.C. 1087e.
    \24\ See http://studentaid.ed.gov/PORTALSWebApp/students/english/studentloans.jsp; http://studentaid.ed.gov/PORTALSWebApp/students/english/parentloans.jsp.
---------------------------------------------------------------------------

    Although variable-rate loans are no longer available under the 
Department of Education programs, the Department of Education publishes 
rates annually for those variable-rate education loans that remain 
outstanding. The rate is based on 91-day Treasury bills plus a 
statutory percentage margin.\25\
---------------------------------------------------------------------------

    \25\ 20 U.S.C. 1087e(b)(6). See also U.S. Department of 
Education, ``FFEL and Direct Loan Interest Rates Effective July 1, 
2009,'' available at http://studentaid.ed.gov/PORTALSWebApp/students/english/FFEL_DL_InterestRates.jsp.
---------------------------------------------------------------------------

    Origination fees are allowed for Federal direct loans. Financial 
institutions may use the fee percentages for Federal loans to students 
and parents, as appropriate, as benchmarks.
    Although the Agencies are adopting a definition of ``low-cost 
education loan'' that is generally similar to the proposal, if the 
Agencies find that the rules as adopted have not acted as an incentive 
to financial institutions' providing low-cost education loans to low-
income borrowers, the Agencies may reconsider these provisions.

``Low-Income Borrower''

The Proposal

    Under the proposed regulation, the term ``low-income'' had the same 
meaning as that term is defined in the existing CRA rule: An individual 
income less than 50 percent of area median income. In the preamble to 
the proposed regulation, the Agencies clarified that, if an institution 
considers the income of more than one person in connection with an 
education loan, the gross annual incomes of all primary obligors on the 
loan, including co-borrowers and co-signers, would be combined to 
determine whether the borrowers are ``low-income.'' \26\ The Agencies 
further noted that various education programs offered by the U.S. 
Department of Education are targeted to individuals who have financial 
needs and the criteria for the programs vary. The Agencies requested 
comment on whether low-income should be defined differently than the 
term is already defined in the CRA regulation. The Agencies also sought 
comment on how they should treat the income of a student's family or 
other expected family contributions to ensure that the CRA 
consideration provided is consistent with HEOA's focus on low-income 
borrowers.
---------------------------------------------------------------------------

    \26\ This is consistent with guidance issued by the Agencies in 
the Interagency Questions and Answers Regarding Community 
Reinvestment, 75 FR 11642, 11671 (Mar. 11, 2010) (Q&A Sec.  --
--.42(c)(1)(iv)-4).
---------------------------------------------------------------------------

Final Rule and Comments

    Several commenters, including community groups and several 
financial institutions or trade associations generally supported using 
the 50 percent benchmark as proposed. Several financial institutions 
and trade associations advocated that the final rule be expanded to 
cover both low-income and moderate-income borrowers as defined by the 
existing CRA rule. A state association of lenders commented that the 
Agencies should simply base the income assessment on loans originated 
through the U.S. Department of Education by defining low-cost education 
loans as need-based federal student loans. This commenter and several 
financial institutions further explained that institutions that make 
U.S. Department of Education loans do not have access to financial and 
income information on students and their families because the student 
borrowers are qualified by the school; thus, it would be hard to 
determine for CRA purposes whether the borrowers are low-income. Some 
of these commenters recommended that low-income borrowers be defined as 
any borrower eligible for a loan through a program of the U.S. 
Department of Education or, for a borrower through a private loan 
program, with qualifying income that is less than 50 percent of area 
median income. Another financial institution recommended that 
government loans that are needs-based, such as subsidized Stafford 
loans, automatically qualify as loans to low-income borrowers. One 
trade association suggested that, as an alternative to the proposed 
definition of low-income (less than 50 percent of the area median 
income), the Agencies could look only at the household income of the 
primary obligor on the loan and if the primary obligor is a dependent 
in a low-income household, the primary obligor would be considered a 
low-income borrower no matter what additional guarantors or co-signors 
are obligated on the loan. Similarly, the commenter noted, if the 
student is a financially emancipated adult, then his/her individual 
income would determine his/her income status. Alternatively, the 
commenter suggests that if all those obligated on the credit are taken 
into account, then the final rule needs to clarify how the Agencies 
will calculate whether the low-income standard is met.
    Several commenters addressed how to treat the income of a student's 
family or other expected family contributions to ensure that the CRA 
consideration is consistent with HEOA's focus on low-income borrowers. 
As noted above, a trade association suggested the final regulation 
should look at the household income of the primary obligor. That 
commenter recommended that household income be considered in lieu of 
considering income of a co-signer, to avoid any situation where 
obtaining a co-signer, who might strengthen the loan application and 
improve the safety and soundness of the loan, might be discouraged for 
CRA-related loans.
    A nonprofit organization commented that, in cases where a student 
is the borrower but is claimed as a dependent, the household income of 
the taxpayer claiming the student should be used to determine whether 
the loan qualifies for CRA consideration. A trade association also 
suggested that if a student has applied for financial aid and has been 
identified as eligible, that should qualify the student as ``low-
income'' for purposes of the test. A financial institution commented 
that, in addition to consideration of income, the CRA evaluation of 
education lending should also consider how many individuals are 
enrolled in or will be enrolled in an

[[Page 61041]]

institution of higher education and whether such individuals had unmet 
financial needs that could be addressed by a private education loan. 
Another financial institution commented that the differences between 
the U.S. Department of Education loan qualification standards, which 
are generally based on need, and the private education loan 
qualification standards, which are generally based on credit score and 
income, should preclude treating Federal program loans and private 
education loans the same for purposes of the ``low-income'' analysis.
    The Agencies considered these commenters' concerns about the 
possibility that a student borrower may be considered to be ``low-
income'' under the CRA standard, even though the student's family may 
be able to provide additional financial support. The Agencies 
considered, for example, adopting a test to determine whether a student 
borrower is an ``independent'' student and, if not, requiring the use 
of family income to determine whether the loan was to a ``low-income'' 
borrower.
    The Agencies are adopting the definition of ``low-income'' as 
proposed--based on an individual income that is less than 50 percent of 
the area median income. As noted above, some financial institutions may 
not require family income information in connection with education 
loans (except when family members co-sign or guaranty the loan). 
Requiring collection of data on family income would likely have imposed 
new burdens and procedural requirements on both borrowers and financial 
institutions.

``Other Education Loan Issues''

Quantitative Consideration

    As proposed by the Agencies, institutions would receive favorable 
qualitative consideration for originating ``low-cost education loans to 
low-income borrowers'' as a factor in the institutions' overall CRA 
rating, independent of the consideration for consumer loans under the 
current lending test. Such loans would be considered responsive to the 
credit needs of the institutions' communities.
    Under the CRA regulations, an institution's consumer lending must 
be evaluated if consumer lending makes up a substantial majority of an 
institution's business. Institutions that do not meet this criterion 
may choose to have education loans evaluated as consumer loans under 
the lending test applicable to the institution. If an institution opts 
to have education loans evaluated, the loans would be evaluated 
quantitatively, based on the data the institution provides. The 
Agencies requested comment on whether the final regulation should also 
allow an institution to receive separate quantitative consideration for 
the number and amount of low-cost education loans to low-income 
borrowers as part of its CRA evaluation under the performance test 
applicable to that institution, without regard to other consumer loans.

Comments and Final Rule

    One financial institution agreed that institutions should receive 
favorable qualitative consideration for originating low-cost loans to 
low-income borrowers and recommended that, consistent with the 
treatment of other consumer loans, education loans not be reviewed as 
part of the quantitative CRA evaluation unless such loans represent a 
substantial majority of the financial institution's business or at the 
institution's option if it has collected and maintained data. Other 
financial institutions and a trade association strongly supported 
providing institutions the option to receive favorable quantitative 
consideration as consumer loans under the lending test of the current 
CRA rules. These commenters further stated that if the low-cost 
education loans were to become a separate subcategory of consumer 
lending, financial institutions would have to generate the necessary 
data, to the extent they do not already exist and that it would be 
difficult to evaluate the data in the absence of data from other 
institutions. They further stated that if this were the approach taken, 
it may be a disincentive to participate. Finally, one financial 
institution commented that the legislation regarding the low-cost 
education loans clearly anticipates that the agencies would consider 
student lending on its own merits, apart from other consumer loan 
categories and suggested that consideration could be accomplished by 
revising the consumer loan reporting categories to include a separate 
category for student loans.
    After consideration of the comments, the Agencies have adopted the 
provision as proposed to make clear that all types and sizes of 
institutions will be eligible to receive qualitative consideration for 
originating ``low-cost education loans to low-income borrowers'' as a 
factor in the institutions' overall CRA rating, without regard to the 
performance test under which an institution is evaluated. As noted 
above, institutions may obtain CRA consideration of education loans as 
consumer loans under existing standards applicable to consumer loans.

Application to All Institutions

    The Agencies also asked whether institutions and other interested 
parties understood that the new provision on low-cost education loans 
to low-income borrowers is applicable to all institutions, without 
regard to institution size, as a result of the provisions' placement in 
12 CFR 25.21, 228.21, 345.21 and 563e.21. No commenters responded 
directly to the question. However, several commenters suggested that 
the Agencies should treat low-cost education loans to low-income 
borrowers differently than initially proposed.
    Several commenters representing small financial institutions 
suggested that the provision should not apply to small financial 
institutions because few small institutions make education loans. As 
discussed above, financial institutions that do not make education 
loans will not be required to start making such loans.
    Another commenter believed that evaluation of education lending 
should not apply to wholesale or limited purpose institutions. The 
Agencies agree that wholesale institutions will not engage directly in 
education lending because, by definition, wholesale institutions do not 
engage in retail lending. Limited purpose institutions, on the other 
hand, could engage in education lending as their narrow product line.
    One commenter suggested that low-cost education loans to low-income 
borrowers should be considered as community development loans. The 
primary reason for this suggestion was based on the more expansive 
consideration of loans that are considered under the community 
development test--not only in an institution's assessment area(s), as 
proposed, but also in the broader statewide or regional area that 
includes its assessment area(s). The Agencies decline to adopt this 
change as suggested. The Agencies note that the legislative history of 
the Act indicates that the Agencies are to consider ``low-cost 
education loans provided by a financial institution to low-income 
borrowers in assessing and taking into account the record of a 
financial institution in meeting the credit needs of its local 
community.'' \27\ The proposed rule restricted favorable consideration 
for low-cost education loans to low-income borrowers to the 
institution's

[[Page 61042]]

assessment area(s). After careful consideration of the comments 
received, the Agencies have decided to apply the same rule that applies 
to the consideration of loans made to low- and moderate-income 
borrowers.\28\ Thus, the final rule provides that the Agencies will 
consider low-cost education loans originated by a financial institution 
to low-income borrowers ``particularly in its assessment area(s).'' 
Similar to the analysis for loans to low- and moderate-income 
individuals generally, the Agencies will consider first whether a 
financial institution has adequately addressed the low-cost education 
loan needs of low-income borrowers in its assessment area(s) and, if 
so, will also consider such loans outside of its assessment 
area(s).\29\ The Agencies believe that the final rule may provide 
greater flexibility and additional incentives for financial 
institutions to provide low-cost education loan programs for low-income 
borrowers.
---------------------------------------------------------------------------

    \27\ H. Rep. No. 110-500 at 366 (2007) (emphasis added). The CRA 
also generally encourages financial institutions to help meet the 
credit needs of the local communities in which they are chartered. 
12 U.S.C. 2901(b).
    \28\ See 12 CFR 25.22(b)(3), 228.22(b)(3), 345.22(b)(3), and 
563e.22(b)(3).
    \29\ See Interagency Questions and Answers Regarding Community 
Reinvestment, 75 FR at 11656-57 (Q&A Sec.  ----.22(b)(2) & (3)-4).
---------------------------------------------------------------------------

    Finally, one commenter emphasized that the provision addressing 
consideration of low-cost education loans to low-income borrowers 
should not affect CRA strategic plans that are already in effect or 
future plans. The Agencies do not intend this provision to affect CRA 
strategic plans.

Other Comments on the Proposed Education Loan Provision

    Several commenters suggested that unnecessarily detailed technical 
requirements should be kept to a minimum in the final rule. The 
Agencies agree and have attempted to do so.
    One commenter suggested that financial institutions should be able 
to receive CRA consideration for loans to students who reside in their 
assessment area(s) and also for loans to students who attend schools in 
the institutions' assessment area(s). The Agencies decline to adopt 
this suggestion. As with other consumer lending, a financial 
institution would look to the ``loan location'' to determine whether 
the loan meets the geographical requirements for loan consideration. 
``A consumer loan is located in the geography where the borrower 
resides * * *. ''\30\ Therefore, the lender should rely on the address 
on the education loan application or otherwise provided by the borrower 
or school to determine the loan location.
---------------------------------------------------------------------------

    \30\ 12 CFR 25.12(o)(1), 228.12(o)(1), 345.12(o)(1), and 
563e.12(o)(1).
---------------------------------------------------------------------------

Activities Undertaken in Cooperation with Minority- and Women-Owned 
Financial Institutions and Low-Income Credit Unions

The Proposal

    Section 804(b) of the Community Reinvestment Act (CRA) provides 
that the Agencies may consider as a factor capital investment, loan 
participation, and other ventures undertaken by the institution in 
cooperation with minority- and women-owned financial institutions and 
low-income credit unions in assessing the CRA record of nonminority- 
and nonwomen-owned financial institutions. These activities, however, 
must help meet the credit needs of the local communities in which such 
institutions and credit unions are chartered.\31\ The Agencies proposed 
to incorporate this statutory language into their regulations and to 
clarify that such activities need not also benefit the assessment area 
or the broader statewide or regional area that includes the assessment 
area of the nonminority- and nonwomen-owned institution. The preamble 
of the proposed rule indicated that activities undertaken to assist 
minority- and women-owned financial institutions and low-income credit 
unions would be considered as part of the overall assessment of the 
nonminority- and nonwomen-owned institution's CRA performance.\32\
---------------------------------------------------------------------------

    \31\ 12 U.S.C. 2903(b).
    \32\ 74 CFR at 31213.
---------------------------------------------------------------------------

    The preamble further explained that the proposed revision to the 
rule would reinforce to examiners, financial institutions, and the 
public that the Agencies may consider and take into account 
nonminority- and nonwomen-owned financial institutions' activities in 
connection with minority- and women-owned financial institutions and 
low-income credit unions.\33\ The Agencies noted that their 2009 
revisions to the ``Interagency Questions and Answers Regarding 
Community Reinvestment'' clarified this point \34\ and indicated the 
proposal was intended to codify this clarification in the rule.
---------------------------------------------------------------------------

    \33\ Id.
    \34\ 74 FR 498, 507 (Jan. 6, 2009) (Q&A Sec.  ----.12(g)-4).
---------------------------------------------------------------------------

    The Agencies proposed to add the new provision addressing favorable 
CRA consideration for activities in cooperation with minority- and 
women-owned financial institutions and low-income credit unions to 12 
CFR 25.21, 228.21, 345.21, and 563e.21. These sections apply to all 
types and sizes of institutions, without regard to the performance test 
under which an institution is evaluated. Accordingly, the preamble 
indicated that the proposed provision would also be applicable to all 
financial institutions. The Agencies also proposed a conforming 
amendment to Appendix A of the regulations to include consideration of 
a financial institution's activities in cooperation with minority- and 
women-owned financial institutions as a factor when assigning a rating 
to the institution.

Comments and Final Rule

    Several consumer and community groups commented on the geographic 
scope of the proposal. They urged the Agencies to narrow the geographic 
scope by providing favorable CRA consideration to investments outside 
the majority-owned institution's assessment area only if the majority-
owned institution met the needs of its assessment area. One community 
organization urged the Agencies to narrow the geographic scope even 
further by providing favorable CRA consideration only to loan 
participations and other ventures undertaken in cooperation with 
minority- and women-owned financial institutions and low-income credit 
unions outside the majority-owned institution's assessment area only if 
the majority-owned institution met the needs of its assessment area.
    As the Agencies explained in the preamble to their 2009 Interagency 
Questions and Answers Regarding Community Reinvestment, the Agencies do 
not currently interpret section 804(b) of the CRA to impose such 
limitations.\35\ However, as indicated in the question and answer 
guidance, the impact of such activities on majority-owned institution's 
CRA rating is determined in conjunction with its overall performance in 
its assessment area(s).\36\ The Agencies note that activities outside 
of the majority-owned institution's assessment area will not compensate 
for poor lending performance within its assessment area and intend to 
add this clarification to the Interagency Questions and Answers 
Regarding Community Reinvestment.
---------------------------------------------------------------------------

    \35\ 74 FR at 500.
    \36\ 74 FR at 507 (Q&A Sec.  --.12(g)-4); 75 FR at 11645 (same).
---------------------------------------------------------------------------

    One financial institution trade association urged the Agencies to 
treat all capital investments, loan participations, and other ventures 
undertaken by a majority-owned institution in cooperation with 
minority- and women-owned financial

[[Page 61043]]

institutions and low-income credit unions as community development 
activities. The statute does not specify how the Agencies must evaluate 
these activities, some of which may not qualify as community 
development activities under the existing rules. Therefore, the 
Agencies have not adopted this suggestion.
    However, the Agencies note that nothing in today's final rule 
affects the ability of any institution to receive community development 
consideration for activities undertaken in cooperation with minority- 
and women-owned financial institutions, low-income credit unions, and 
other financial intermediaries in those limited circumstances where 
such activities meet all of the rule's requirements for community 
development consideration. These requirements include having a primary 
purpose of community development (as defined in 12 CFR 25.12(g), 
228.12(g), 345.12(g), or 563e.12(g), as applicable) and meeting the 
applicable geographic restrictions for community development 
activities. The Agencies' Interagency Questions and Answers Regarding 
Community Reinvestment provide as an example of ``qualified 
investments,'' investments, grants, deposits, or shares in or to 
financial intermediaries, including minority- and women-owned financial 
institutions, that primarily lend or facilitate lending in low- and 
moderate-income areas or to low- and moderate-income individuals in 
order to promote community development.\37\ Similarly, the Interagency 
Questions and Answers provide as an example of ``community development 
loans,'' loans to financial intermediaries, including minority- and 
women-owned financial institutions, which primarily lend or facilitate 
lending to promote community development.\38\ The Agencies are not 
changing the availability of community development consideration for 
these activities. Today's final rule allows capital investments, loan 
participations, and other ventures undertaken by a majority-owned 
institution in cooperation with minority- and women-owned financial 
institutions and low-income credit unions to be considered as a factor 
when assigning a rating; it applies to a broader range of activities 
than may qualify for community development consideration.
---------------------------------------------------------------------------

    \37\ 75 FR at 11652 (Q&A Sec.  --.12(t)-4).
    \38\ 75 FR at 11648 (Q&A Sec.  --.12(h)-1).
---------------------------------------------------------------------------

    Several consumer and community organizations urged the Agencies to 
conduct an analysis of the impact of the 2009 guidance on minority- and 
women-owned institutions (Q&A Sec.  --.12(g)-4) before codifying the 
question and answer into the CRA rule. They urged the Agencies to 
evaluate the types of investments, loans, and services that have been 
leveraged to see whether they have disproportionately benefited 
predominantly white middle- and upper-income communities. They also 
urged the Agencies to ascertain whether bank financing of low-income 
credit unions and minority- and women-owned financial institutions has 
also benefited minorities and communities of color. The Agencies note 
that they are generally incorporating into the CRA regulations the 
statutory provision adopted by Congress.
    The Agencies are adopting 12 CFR --.21(f) and revising Appendix A 
as proposed.

Effective Date

    This joint final rule becomes effective 30 days after the date of 
publication in the Federal Register.

Interagency Guidance

    The Agencies intend to issue for comment interagency CRA guidance 
addressing primarily the new provision addressing low-cost education 
loans made to low-income borrowers in the near future. The guidance, in 
the form of new interagency questions and answers, will include 
relevant explanatory discussion in the supplementary information 
accompanying this final rule. As noted above, the Agencies will also 
revise existing guidance to reflect the regulatory provisions \39\ on 
activities in cooperation with minority- and women-owned financial 
institutions and low-income credit unions and to indicate that such 
activities outside of the majority-owned institution's assessment 
area(s) will not compensate for poor lending performance within its 
assessment area(s).
---------------------------------------------------------------------------

    \39\ 12 CFR 25.21(f); 228.21(f); 345.21(f); and 563e.21(f).
---------------------------------------------------------------------------

Regulatory Analysis

Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
Ch. 3506; 5 CFR 1320 Appendix A.1) (PRA), each agency reviewed its 
final rule and determined that there are no new collections of 
information contained therein. However, the amendments may have a 
negligible affect on burden estimates for existing information 
collections, including recordkeeping requirements for consumer loans. 
The Agencies did not receive any comments on the PRA section of the 
proposed rule.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) requires an agency that is 
issuing a final rule to provide a final regulatory flexibility analysis 
or to certify that the rule will not have a significant economic impact 
on a substantial number of small entities.
    Under regulations issued by the Small Business Administration, a 
small entity includes a bank holding company, commercial bank, or 
savings association with assets of $175 million or less (collectively, 
small banking organizations). Under this joint final rule, the Agencies 
would consider, as a factor, when assessing an institution's CRA record 
that the institution made low-cost education loans to low-income 
borrowers or engaged in activities in cooperation with minority- or 
women-owned financial institutions or low-income credit unions. The 
Agencies believe that this joint final rule will not have a significant 
economic impact on a substantial number of small entities because the 
final rule does not require a financial institution to engage in these 
activities. In addition, the Agencies did not receive any comments that 
the proposal would have a significant impact on small banking 
organizations. Accordingly, each of the Agencies certifies that this 
rule will not have a significant economic impact on a substantial 
number of small entities.

OCC and OTS Executive Order 12866 Determinations

    Pursuant to Executive Order 12866, OMB's Office of Information and 
Regulatory Affairs (OIRA) has designated the final rule to be 
significant.

OCC and OTS Unfunded Mandates Reform Act of 1995 Determination

    Section 202 of the Unfunded Mandates Reform Act of 1995 (Unfunded 
Mandates Act) (2 U.S.C. 1532) requires that covered agencies prepare a 
budgetary impact statement before promulgating a rule that includes any 
Federal mandate that may result in the expenditure by State, local, and 
tribal governments, in the aggregate, or by the private sector, of $100 
million or more in any one year. If a budgetary impact statement is 
required, section 205 of the Unfunded Mandates Act also requires 
covered agencies to identify and consider a reasonable number of 
regulatory alternatives before promulgating a rule. The OCC and the OTS 
have determined that this joint final rule will not result in 
expenditures by State, local, and tribal governments, or by the private 
sector, of $100 million

[[Page 61044]]

or more in any one year. Accordingly, neither agency has prepared a 
budgetary impact statement or specifically addressed the regulatory 
alternatives considered.

The Treasury and General Government Appropriations Act, 1999--
Assessment of Impact of Federal Regulation on Families

    The FDIC has determined that this joint final rule will not affect 
family well-being within the meaning of section 654 of the Treasury and 
General Government Appropriations Act, enacted as part of the Omnibus 
Consolidated and Emergency Supplemental Appropriations Act of 1999, 
Public Law 105-277 (5 U.S.C. 601 note).

OCC and OTS Executive Order 13132 Determination

    The OCC and the OTS have each determined that its portion of this 
joint final rule does not have any Federalism implications, as required 
by Executive Order 13132.

Administrative Procedure Act; Riegle Community Development and 
Regulatory Improvement Act of 1994

    This joint final rule becomes effective 30 days after the date of 
publication in the Federal Register.
    Section 302 of the Riegle Community Development and Regulatory 
Improvement Act of 1994 (CDRIA), Public Law 103-325, authorizes a 
banking agency to issue a rule that contains additional reporting, 
disclosure, or other requirements to be effective before the first day 
of the calendar quarter that begins on or after the date on which the 
regulations are published in final form if the agency finds good cause 
for an earlier effective date. 12 U.S.C. 4802(b)(1). Section 302 of 
CDRIA does not apply because this final rule imposes no additional 
requirements. Rather, it reduces burden by expanding the ways 
institutions may receive CRA consideration.

List of Subjects

12 CFR Part 25

    Community development, Credit, Investments, National banks, 
Reporting and recordkeeping requirements.

12 CFR Part 228

    Banks, banking, Community development, Credit, Investments, 
Reporting and recordkeeping requirements.

12 CFR Part 345

    Banks, banking, Community development, Credit, Investments, 
Reporting and recordkeeping requirements.

12 CFR Part 563e

    Community development, Credit, Investments, Reporting and 
recordkeeping requirements, Savings associations.

Department of the Treasury

Office of the Comptroller of the Currency

12 CFR Chapter I

Authority and Issuance

0
For the reasons discussed in the joint preamble, the Office of the 
Comptroller of the Currency amends part 25 of chapter I of title 12 of 
the Code of Federal Regulations as follows:

PART 25--COMMUNITY REINVESTMENT ACT AND INTERSTATE DEPOSIT 
PRODUCTION REGULATIONS

0
1. The authority citation for part 25 is revised to read as follows:

    Authority: 12 U.S.C. 21, 22, 26, 27, 30, 36, 93a, 161, 215, 
215a, 481, 1814, 1816, 1828(c), 1835a, 2901 through 2908, and 3101 
through 3111.


0
2. In Sec.  25.21, add new paragraphs (e) and (f) to read as follows:


Sec.  25.21  Performance tests, standards, and ratings, in general.

* * * * *
    (e) Low-cost education loans provided to low-income borrowers. In 
assessing and taking into account the record of a bank under this part, 
the OCC considers, as a factor, low-cost education loans originated by 
the bank to borrowers, particularly in its assessment area(s), who have 
an individual income that is less than 50 percent of the area median 
income. For purposes of this paragraph, ``low-cost education loans'' 
means any education loan, as defined in section 140(a)(7) of the Truth 
in Lending Act (15 U.S.C. 1650(a)(7)) (including a loan under a state 
or local education loan program), originated by the bank for a student 
at an ``institution of higher education,'' as that term is generally 
defined in sections 101 and 102 of the Higher Education Act of 1965 (20 
U.S.C. 1001 and 1002) and the implementing regulations published by the 
U.S. Department of Education, with interest rates and fees no greater 
than those of comparable education loans offered directly by the U.S. 
Department of Education. Such rates and fees are specified in section 
455 of the Higher Education Act of 1965 (20 U.S.C. 1087e).
    (f) Activities in cooperation with minority- or women-owned 
financial institutions and low-income credit unions. In assessing and 
taking into account the record of a nonminority-owned and nonwomen-
owned bank under this part, the OCC considers as a factor capital 
investment, loan participation, and other ventures undertaken by the 
bank in cooperation with minority- and women-owned financial 
institutions and low-income credit unions. Such activities must help 
meet the credit needs of local communities in which the minority- and 
women-owned financial institutions and low-income credit unions are 
chartered. To be considered, such activities need not also benefit the 
bank's assessment area(s) or the broader statewide or regional area 
that includes the bank's assessment area(s).


0
3. In Appendix A to Part 25, paragraph (a)(1) is revised to read as 
follows:

Appendix A to Part 25--Ratings

    (a) * * *
    (1) In assigning a rating, the OCC evaluates a bank's 
performance under the applicable performance criteria in this part, 
in accordance with Sec. Sec.  25.21 and 25.28. This includes 
consideration of low-cost education loans provided to low-income 
borrowers and activities in cooperation with minority- or women-
owned financial institutions and low-income credit unions, as well 
as adjustments on the basis of evidence of discriminatory or other 
illegal credit practices.
* * * * *

Federal Reserve System

12 CFR Chapter II

Authority and Issuance

0
For the reasons set forth in the joint preamble, the Board of Governors 
of the Federal Reserve System amends part 228 of chapter II of title 12 
of the Code of Federal Regulations as follows:

PART 228--COMMUNITY REINVESTMENT (REGULATION BB)

0
1. The authority citation for part 228 is revised as proposed to read 
as follows:

    Authority: 12 U.S.C. 321, 325, 1828(c), 1842, 1843, 1844, and 
2901 through 2908.


0
2. In Sec.  228.21, add new paragraphs (e) and (f) to read as follows:


Sec.  228.21  Performance tests, standards, and ratings, in general.

* * * * *
    (e) Low-cost education loans provided to low-income borrowers. In 
assessing and taking into account the record of a

[[Page 61045]]

bank under this part, the Board considers, as a factor, low-cost 
education loans originated by the bank to borrowers, particularly in 
its assessment area(s), who have an individual income that is less than 
50 percent of the area median income. For purposes of this paragraph, 
``low-cost education loans'' means any education loan, as defined in 
section 140(a)(7) of the Truth in Lending Act (15 U.S.C. 1650(a)(7)) 
(including a loan under a state or local education loan program), 
originated by the bank for a student at an ``institution of higher 
education,'' as that term is generally defined in sections 101 and 102 
of the Higher Education Act of 1965 (20 U.S.C. 1001 and 1002) and the 
implementing regulations published by the U.S. Department of Education, 
with interest rates and fees no greater than those of comparable 
education loans offered directly by the U.S. Department of Education. 
Such rates and fees are specified in section 455 of the Higher 
Education Act of 1965 (20 U.S.C. 1087e).
    (f) Activities in cooperation with minority- or women-owned 
financial institutions and low-income credit unions. In assessing and 
taking into account the record of a nonminority-owned and nonwomen-
owned bank under this part, the Board considers as a factor capital 
investment, loan participation, and other ventures undertaken by the 
bank in cooperation with minority- and women-owned financial 
institutions and low-income credit unions. Such activities must help 
meet the credit needs of local communities in which the minority- and 
women-owned financial institutions and low-income credit unions are 
chartered. To be considered, such activities need not also benefit the 
bank's assessment area(s) or the broader statewide or regional area 
that includes the bank's assessment area(s).

0
3. In Appendix A to Part 228, paragraph (a)(1) is revised to read as 
follows:

Appendix A to Part 228--Ratings

    (a) * * *
    (1) In assigning a rating, the Board evaluates a bank's 
performance under the applicable performance criteria in this part, 
in accordance with Sec. Sec.  228.21 and 228.28. This includes 
consideration of low-cost education loans provided to low-income 
borrowers and activities in cooperation with minority- or women-
owned financial institutions and low-income credit unions, as well 
as adjustments on the basis of evidence of discriminatory or other 
illegal credit practices.
* * * * *

Federal Deposit Insurance Corporation

12 CFR Chapter III

Authority and Issuance

0
For the reasons set forth in the joint preamble, the Board of Directors 
of the Federal Deposit Insurance Corporation amends part 345 of chapter 
III of title 12 of the Code of Federal Regulations as follows:

PART 345--COMMUNITY REINVESTMENT

0
1. The authority citation for part 345 is revised to read as follows:

    Authority: 12 U.S.C. 1814-1817, 1819-1820, 1828, 1831u and 2901-
2908, 3103-3104, and 3108(a).

0
2. In Sec.  345.21, add new paragraphs (e) and (f) to read as follows:


Sec.  345.21  Performance tests, standards, and ratings, in general.

* * * * *
    (e) Low-cost education loans provided to low-income borrowers. In 
assessing and taking into account the record of a bank under this part, 
the FDIC considers, as a factor, low-cost education loans originated by 
the bank to borrowers, particularly in its assessment area(s), who have 
an individual income that is less than 50 percent of the area median 
income. For purposes of this paragraph, ``low-cost education loans'' 
means any education loan, as defined in section 140(a)(7) of the Truth 
in Lending Act (15 U.S.C. 1650(a)(7)) (including a loan under a state 
or local education loan program), originated by the bank for a student 
at an ``institution of higher education,'' as that term is generally 
defined in sections 101 and 102 of the Higher Education Act of 1965 (20 
U.S.C. 1001 and 1002) and the implementing regulations published by the 
U.S. Department of Education, with interest rates and fees no greater 
than those of comparable education loans offered directly by the U.S. 
Department of Education. Such rates and fees are specified in section 
455 of the Higher Education Act of 1965 (20 U.S.C. 1087e).
    (f) Activities in cooperation with minority- or women-owned 
financial institutions and low-income credit unions. In assessing and 
taking into account the record of a nonminority-owned and nonwomen-
owned bank under this part, the FDIC considers as a factor capital 
investment, loan participation, and other ventures undertaken by the 
bank in cooperation with minority- and women-owned financial 
institutions and low-income credit unions. Such activities must help 
meet the credit needs of local communities in which the minority- and 
women-owned financial institutions and low-income credit unions are 
chartered. To be considered, such activities need not also benefit the 
bank's assessment area(s) or the broader statewide or regional area 
that includes the bank's assessment area(s).

0
3. In Appendix A to Part 345, paragraph (a)(1) is revised to read as 
follows:

Appendix A to Part 345--Ratings

    (a) * * *
    (1) In assigning a rating, the FDIC evaluates a bank's 
performance under the applicable performance criteria in this part, 
in accordance with Sec. Sec.  345.21 and 345.28. This includes 
consideration of low-cost education loans provided to low-income 
borrowers and activities in cooperation with minority- or women-
owned financial institutions and low-income credit unions, as well 
as adjustments on the basis of evidence of discriminatory or other 
illegal credit practices.
* * * * *

Department of the Treasury

Office of Thrift Supervision

12 CFR Chapter V

0
For the reasons set forth in the joint preamble, the Office of Thrift 
Supervision amends part 563e of chapter V of title 12 of the Code of 
Federal Regulations as follows:

PART 563e--COMMUNITY REINVESTMENT

0
1. The authority citation for part 563e is revised to read as follows:

    Authority: 12 U.S.C. 1462a, 1463, 1464, 1467a, 1814, 1816, 
1828(c), and 2901 through 2908.

0
2. In Sec.  563e.21, add new paragraphs (e) and (f) to read as follows:


Sec.  563e.21  Performance tests, standards, and ratings, in general.

* * * * *
    (e) Low-cost education loans provided to low-income borrowers. In 
assessing and taking into account the record of a savings association 
under this part, the OTS considers, as a factor, low-cost education 
loans originated by the savings association to borrowers, particularly 
in its assessment area(s), who have an individual income that is less 
than 50 percent of the area median income. For purposes of this 
paragraph, ``low-cost education loans'' means any education loan, as 
defined in section 140(a)(7) of the Truth in Lending Act (15 U.S.C. 
1650(a)(7)) (including a loan under a state or local education loan 
program), originated by the savings

[[Page 61046]]

association for a student at an ``institution of higher education,'' as 
that term is generally defined in sections 101 and 102 of the Higher 
Education Act of 1965 (20 U.S.C. 1001 and 1002) and the implementing 
regulations published by the U.S. Department of Education, with 
interest rates and fees no greater than those of comparable education 
loans offered directly by the U.S. Department of Education. Such rates 
and fees are specified in section 455 of the Higher Education Act of 
1965 (20 U.S.C. 1087e).
    (f) Activities in cooperation with minority- or women-owned 
financial institutions and low-income credit unions. In assessing and 
taking into account the record of a nonminority-owned and nonwomen-
owned savings association under this part, the OTS considers as a 
factor capital investment, loan participation, and other ventures 
undertaken by the savings association in cooperation with minority- and 
women-owned financial institutions and low-income credit unions. Such 
activities must help meet the credit needs of local communities in 
which the minority- and women-owned financial institutions and low-
income credit unions are chartered. To be considered, such activities 
need not also benefit the savings association's assessment area(s) or 
the broader statewide or regional area that includes the savings 
association's assessment area(s).

0
3. In Appendix A to Part 563e, paragraph (a)(1) is revised to read as 
follows:

Appendix A to Part 563e--Ratings

    (a) * * *
    (1) In assigning a rating, the OTS evaluates a savings 
association's performance under the applicable performance criteria 
in this part, in accordance with Sec. Sec.  563e.21 and 563e.28. 
This includes consideration of low-cost education loans provided to 
low-income borrowers and activities in cooperation with minority- or 
women-owned financial institutions and low-income credit unions, as 
well as adjustments on the basis of evidence of discriminatory or 
other illegal credit practices.
* * * * *

    Dated: June 29, 2010.
John C. Dugan,
Comptroller of the Currency.


    By order of the Board of Governors of the Federal Reserve 
System, September 2, 2010.
Jennifer J. Johnson,
Secretary of the Board.

    Dated at Washington, DC, this 27th day of September, 2010.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
    Dated: September 24, 2010.

    By the Office of Thrift Supervision.
John E. Bowman,
Acting Director.
[FR Doc. 2010-24737 Filed 10-1-10; 8:45 am]
BILLING CODE 4810-33-P; 6210-01-P; 6714-01-P; 6720-01-P