REFORMING THE COMMUNITY REINVESTMENT ACT TO ENSURE INVESTMENT IN LOW INCOME COMMUNTIES
WHEREAS, the Community Reinvestment Act (CRA) is in great need for an update to keep up with the major changes in the financial industry, particularly as many banks move to offer more services online and away from brick-and-mortar locations;
WHEREAS, the Trump Administration made rule changes to the CRA that made it easier for many banks to pass their CRA exams, and these changes reduced the incentives for banks to open branches or approve mortgages in low-income neighborhoods;
WHEREAS, African Americans face disparities in homeownership, according to a report by the Urban Institute;
WHEREAS, the CRA is in great need for an update to keep up with the major changes in the financial industry since the last major CRA reforms were enacted in 1995 and the administrative rule changes in 2020;
WHEREAS, over the past two decades or so, there has been the emergence of the Fintech or financial technology industry, including non-bank mortgage lenders; non-banking Fintech companies are not covered by the Community Reinvestment Act;
WHEREAS, the Fintech industry uses financial technology to assist companies, business owners and consumers to improve the management of their financial operations and processes, and includes computers, software, algorithms, smartphones, and the Web;
WHEREAS, nearly 14.2 million Americans, or 6% of the adult population, use digital banking as their only form of money management;
WHEREAS, the number of online banks and other digital lending facilities continue to increase as well as P2P (peer-to-peer) lending platforms, which offer an alternative to traditional bank loans;
WHEREAS, the Community Reinvestment Act is a federal law established to encourage commercial banks and savings associations to assist all types of borrowers, including low- and moderate-income communities, in meeting their credit needs;
WHEREAS, the Congress passed the Community Reinvestment Act in 1977 to halt discriminatory credit practices against minority and low-income neighborhoods—also referred to as redlining;
WHEREAS, the policy of redlining by the Federal Government prohibited African-American families and communities from the subsidized mortgages that helped create affluent suburbs and the White middle class;
WHEREAS, predominantly Black neighborhoods were marked in red on maps to identify them as hazardous for lending;
WHEREAS, the CRA requires that all banking institutions backed by Federal Deposit Insurance Corporation (FDIC) insurance have their performance evaluated by Federal banking agencies to determine if the bank offers credit that is consistent with safe and sound operation in all communities in which they are chartered to do business;
WHEREAS, the purpose of the CRA is to prevent racial discrimination by encouraging banks to better serve all the people in the places where they are based, and geographic assessment areas are used by examiners to grade the performance of banks;
WHEREAS, performance ratings are determined by such factors as lending to lower-income borrowers, providing financial education, and investing in affordable housing, and further a rating can decide the fate of mergers and expansions; and
WHEREAS, legislation has been introduced by U.S. Senator Elizabeth Warren (D-MA) and U.S. Representative Emanuel Cleaver (D-MO) entitled the “Strengthening the Community Reinvestment Act of 1977, of the American Housing and Economic Mobility Act of 2021” (S. 1368, H.R. 2768), a bill to update the Community Reinvestment Act and expand its coverage of the financial industry.
THEREFORE BE IT RESOLVED, that the National Black Caucus of State Legislators (NBCSL) supports applying the Community Reinvestment Act to the Fintech or financial technology industry, including non-banking mortgage lenders because it would help in improving the performance of the Fintech industry to prevent racial discrimination in lending and other financial services;
BE IT FURTHER RESOLVED, that NBCSL supports legislation that would update the Community Reinvestment Act and to expand its coverage of the financial industry;
BE IT FURTHER RESOLVED, that NBCSL further supports legislation that would update Section 203 by increasing lending, investments, and bank services to traditionally underserved areas by improving the rigor of CRA as applied to banks, applying CRA to mortgage companies and increasing the public accountability of credit unions;
BE IT FURTHER RESOLVED, that the NBCSL urges support of fair policy reform of the Community Reinvestment Act to take into account the changes in the financial industry since 1995 and to rescind the administrative rule changes from 2020 that reduce incentives to open locations in low-income communities;
BE IT FURTHER RESOLVED, that the NBCSL urges Community Reinvestment Act reforms to include broader assessment areas to capture the impact of national and internet banks, and use more quantitative metrics to reflect the changes in the financial industry since 1995, and strengthen the reporting of activities in minority- and low-income communities;
BE IT FURTHER RESOLVED, that the NBCSL supports rescinding the previous administration’s changes to the CRA as the Biden Administration indicated it will do to ensure that the mission of the CRA is maintained and strengthened; and
BE IT FINALLY RESOLVED, that a copy of this resolution be transmitted to the President of the United States, the Vice President of the United States, members of the United States House of Representatives and the United States Senate, and other federal and state government officials and agencies as appropriate.
- SPONSOR: Senator James Sanders, Jr. (NY)
- Committee of Jurisdiction: Business and Economic Development (BED) Policy Committee
- Ratified in Plenary Session: December 2, 2021
- Ratification certified by: Representative Billy Mitchell (GA), NBCSL President
ESTABLISHING PUBLIC BANKS
WHEREAS, there is significant economic inequality and access to banking services among African Americans in the United States, according to a 2019 report by McKinsey & Co, which stated that Black households have problems getting access to mortgage credit;
WHEREAS, discrimination has resulted in credit characteristics among Black households which are weaker than White households, according to an Urban Institute report;
WHEREAS, a public bank is a financial institution created by a state, city, county, town, village, or a federal government for a “public benefit” to the community, state, or the nation;
WHEREAS, the municipality, state or federal government that creates a public bank that can make public deposits into the public bank;
WHEREAS, the public bank could exist in unbanked and underbanked communities—ones that have little to no access to quality banking services;
WHEREAS, city and state governments pay many billions of dollars to banks and investors in interest on loans issued for public objectives;
WHEREAS, public banks and public financing options can save billions of dollars for state and local governments by making below-market loans;
WHEREAS, there are numerous federal programs that help provide low interest loans to government through programs like the Transportation Infrastructure Finance and Innovation Act, the Drinking Water State Revolving Loan Fund, the Clean Water State Revolving Loan Fund, and the recently created STORM Act which established the Resilience Revolving Loan Fund;
WHEREAS, the public bank could: fund local projects at a reduced cost; generate profits for local government to hold the line on taxes, finance infrastructure, provide access to credit for communities of color and minority- and women-owned business enterprises (MWBEs), refinance student debts and provide low-cost student loans, and provide financial assistance to farmers;
WHEREAS, the Bank of North Dakota, founded in 1919, is currently the only public bank that exists in the United States, although there are many public banks in Europe and elsewhere;
WHEREAS, the Bank of North Dakota has consistently been awarded an “A” rating by the major credit rating agency Standard & Poor’s, demonstrating the highest possible levels of confidence in the bank’s standards, practices, and credit worthiness;
WHEREAS, the Bank of North Dakota secured more federal Paycheck Protection Program (PPP) funds for small businesses than their competitors in any other state relative to the state’s workforce;
WHEREAS, over the last decade, nearly half the states and Congress have introduced legislation to establish a public bank; and
WHEREAS, the State of California enacted a law in 2019 allowing municipalities to form a public bank.
THEREFORE BE IT RESOLVED, that the National Black Caucus of State Legislators (NBCSL) will work with its partners to establish public banks because public banks can fund local projects at a reduced cost, generate profits for local government to hold the line on taxes, finance infrastructure, provide access to credit for communities of color and minority- and women-owned business enterprises (MWBEs), refinance student debts and provide low cost student loans; and provide financial assistance to farmers;
BE IT FURTHER RESOLVED, that the NBCSL supports full funding for Transportation Infrastructure Finance and Innovation Act, the Drinking Water State Revolving Loan Fund, the Clean Water State Revolving Loan Fund, and the recently created STORM Act; and
BE IT FINALLY RESOLVED, that a copy of this resolution be transmitted to the President of the United States, the Vice President of the United States, members of the United States House of Representatives and the United States Senate, and other federal and state government officials and agencies as appropriate
- SPONSOR: Senator James Sanders, Jr. (NY)
- Committee of Jurisdiction: Business and Economic Development (BED) Policy Committee
- Ratified in Plenary Session: December 2, 2021
- Ratification certified by: Representative Billy Mitchell (GA), NBCSL President
ELIMINATING HEALTH CARE, FOOD, AND CREDIT DESERTS
WHEREAS, the National Black Caucus of State Legislators (NBCSL) has a long history of creating policy to end disparities that have plagued communities of color, including passage of resolution AGR-14-46, “A Resolution Advocating the Elimination of Food Deserts”;
WHEREAS, the challenge faced by minority and low- and moderate-income communities is not the availability of unhealthy fast food as much as it is the lack of access to healthy alternatives;
WHEREAS, according to 2014 study from Johns Hopkins University comparing census tracts of similar poverty levels found that Black communities had the fewest supermarkets, white communities had the most, and multiracial communities were in the middle;
WHEREAS, it is not the availability certain healthcare resources as much as it is the lack of access to quality healthcare;
WHEREAS, in Maryland, African Americans make up 31% of the population, but accounted for 52% of the death from COVID-19 according to the Washington Post;
WHEREAS, it is not the availability of financial resources as much as it is the lack of access to resources that help the community to build good credit;
WHEREAS, according to a study by Morgan State University “financially at-risk conditions (e.g., lack of financial institutions, marked presence of predatory lenders, few businesses) exist in the aggregate, forming concentrated zones that are more likely located in communities that are home to people of color, those less educated and those of low economic means”; and
WHEREAS, there is an urgent need to enact a national and state plans to address the availability and equitable distribution of critical resources in all fifty states and territories.
THEREFORE BE IT RESOLVED, that the National Black Caucus of State (NBCSL) work with a variety of partners including the Equitable Growth Fund to identify and address health care, food, and credit deserts;
BE IT FURTHER RESOLVED, that the NBCSL will study and develop model legislation that uses data to identify and address these deserts;
BE IT FURTHER RESOLVED, that NBCSL believes that a data-centric approach to address social justice issues is needed to manage both government resources and identify where private resources need to be developed;
BE IT FURTHER RESOLVED, that the NBCSL urges the development and implementation of state and community-based programs to support initiatives aimed at reducing health care, food, and financial disparities, to bring healthier options into underserved communities across America; and
BE IT FINALLY RESOLVED, that a copy of this resolution be transmitted to the President of the United States, the Vice President of the United States, members of the United States House of Representatives and the United States Senate, and other federal and state government officials and agencies as appropriate.
- SPONSOR: Representative Sonya Harper (IL)
- Committee of Jurisdiction: Business and Economic Development (BED) Policy Committee
- Ratified in Plenary Session: December 2, 2021
- Ratification certified by: Representative Billy Mitchell (GA), NBCSL President
SAFE AND AFFORDABLE LENDING PRACTICES TO AID CONSUMERS AND ESTABLISH CREDIT
WHEREAS, the National Black Caucus of State Legislators (NBCSL) has always been committed to financial empowerment through improved access to capital as well as a marketplace that offers safe and affordable lending products and services;
WHEREAS, in 1998, the United Nations defined poverty as the lack of access to certain essential goods and services, including access to credit;
WHEREAS, the need for small-dollar closed end credit exists in every community throughout the country;
WHEREAS, not all loan types are equally safe and affordable, and the structure of certain loans significantly increases the likelihood of borrowers falling into a cycle of debt;
WHEREAS, responsibly structured credit is essential to support a household’s ability to save, build a sound credit history, and facilitate crucial investments that can provide a foundation for other wealth-building activities;
WHEREAS, the key structural qualities of closed end loans that are safe and affordable are that the lender makes a good faith effort to assess the borrower’s ability to repay the loan and that the loan is repayable in substantially equal installments, with no balloon payments;
WHEREAS, it is the intention of this body to ensure access to loans that are low cost since consumers buy goods with dollars and cents and not with annual percentage rates;
WHEREAS, NBCSL passed Resolution BFI-13-14, “PROMOTING SAFE AND AFFORDABLE LENDING PRACTICES,” among the 2013 Ratified Resolutions and that resolution promotes safeguards to protect the community from abusive financial services;
WHEREAS, responsibly structured credit is an essential part of the wealth-building ecosystem, that includes building a sound credit history, as well as saving and wise investment;
WHEREAS, all small-dollar closed end credit should be “fully amortized,” meaning that the total of payments defined under the Federal Truth in Lending Act, is repaid in substantially equal multiple installments at fixed intervals to fulfill the consumer’s obligation and such payments should not be excessively large where the consumer is unable to make the payments;
WHEREAS, small-dollar closed end credit, should be used prudently by consumers and lenders to help establish, re-establish, or improve credit scores and not create a never-ending cycle of debt;
WHEREAS, all small-dollar closed end credit should be reported to at least one of the three major credit agencies: Equifax, Experian, and TransUnion;
WHEREAS, all small-dollar closed end credit should provide that the Total of Payments as defined in the Truth in Lending Act have a repayment period over at least a 120-days in substantially equal payments and fully disclosed to the customer; and
WHEREAS, Traditional Installment Loan Lenders offering amortizing small-dollar closed end credit, may prevent cycle of debt issues inherent with non-amortizing balloon payment loans.
THEREFORE BE IT RESOLVED, that the National Black Caucus of State Legislators (NBCSL) recognizes the role that small-dollar closed end credit in the form of traditional installment loans can play for consumers in certain circumstances;
BE IT FURTHER RESOLVED, that both Traditional Installment Loan Lenders and consumers should be reasonably protected and enter into agreements that are fair to both parties;
BE IT FURTHER RESOLVED, that the NBCSL believes that there is the role for the expansion of Traditional Installment Loans as an affordable means for borrowers to establish credit and secure small dollar closed end credit while preventing cycle of debt issues inherent with non-amortizing balloon payment loans; and
BE IT FINALLY RESOLVED, that a copy of this resolution be transmitted to the President of the United States, the Vice President of the United States, members of the United States House of Representatives and the United States Senate, and other federal and state government officials and agencies as appropriate.
- SPONSOR(S): Representative Billy Mitchell (GA) and Representative Karen Camper (TN)
- Committee of Jurisdiction: Business and Economic Development (BED) Policy Committee
- Ratified in Plenary Session: December 2, 2021
- Ratification certified by: Representative Billy Mitchell (GA), NBCSL President
EQUITABLE TREATMENT FOR CAR RENTAL TRANSACTIONS
WHEREAS, the National Black Caucus of State Legislators (NBCSL) welcome any innovation, platform or service to meet the mobility needs for communities of color, and are committed to ensuring all companies within the rental car industry, including peer-to-peer vehicle sharing companies, receive regulatory fairness and parity;
WHEREAS, the NBCSL has consistently supported policies that treat businesses in a similar and equitable fashion to ensure a fair, safe, and equitable marketplace for all businesses;
WHEREAS, the rental car industry has historically provided and continues to provide important transportation options for communities of color and valuable revenue to support state governments as well as important projects in local communities;
WHEREAS, legislation is being adopted in states across the country further helps protect communities by adding important consumer protections, including regulations regarding safety standards and insurance for vehicles on the road;
WHEREAS, the legislation supports the state general fund, as well as special authorized projects, by providing clear and consistent taxation guidelines for all car rental services, regardless of the platform through which the service is solicited;
WHEREAS, the legislation provides clarity and consistency on how car rental services contribute to the maintenance of public infrastructure that benefits members of the community, including airports;
WHEREAS, these policies have been endorsed by a broad and diverse coalition of consumer advocacy organizations, municipal groups, insurance regulators and other proponents of public infrastructure;
WHEREAS, the peer-to-peer model of vehicle sharing is similar to traditional car rental service, including through digital platforms like apps, regardless of the duration of the rental;
WHEREAS, consumers should be able to trust that vehicle they have rented is safe and up-to-date on all maintenance requirements, that proper insurance is provided, and taxes are paid; and
WHEREAS, certain states may regulate, and tax identical rental transactions differently based on whether they are managed by a peer-to-peer car rental provider or traditional car rental provider.
THEREFORE BE IT RESOLVED, that the National Black Caucus of State Legislators (NBCSL) is committed to supporting efforts to ensure that communities are treated equitably and fairly when utilizing any of the mobility options available in their community;
BE IT FURTHER RESOLVED, that the NBCSL recognizes that state adoption of legislation that streamlines, clarifies, and makes consistent, regulations for all car rental companies including peer-to-peer vehicle sharing services, ensures that all individuals receive the same protections and pay the same taxes regardless of how they choose to rent a vehicle;
BE IT FURTHER RESOLVED, that the NBCSL urges the passage and implementation of these laws for the sake of public interest, to protect state tax revenue and ensure that consumer safety; and
BE IT FINALLY RESOLVED, that a copy of this resolution be transmitted to the President of the United States, the Vice President of the United States, members of the United States House of Representatives and the United States Senate, and other federal and state government officials and agencies as appropriate.
- SPONSOR(S): Representative Harold Love, Jr. and Senator James Sanders, Jr. (NY)
- Committee of Jurisdiction: Business and Economic Development (BED) Policy Committee
- Ratified in Plenary Session: December 2, 2021
- Ratification certified by: Representative Billy Mitchell (GA), NBCSL President