The U.S. House Committee on Financial Services recently held hearings on the Office of the Comptroller of the Currency (OCC) proposal to update the Community Reinvestment Act (CRA). The Community Reinvestment Act of 1977 is one of the few policies that forces banks to provide equal services to black and brown customers and holds banks accountable for discrimination. Congress passed the CRA following the Civil Rights Movement to redress banks’ racist redlining. However, under the guise of “modernization,” the OCC’s proposed changes would weaken the CRA and make it even more difficult to force banks’ equal service.
Consumer advocacy groups and Democratic policymakers have decried the OCC’s proposal as discriminatory. They assert that it would allow banks and lenders to continue underserving and exploiting black, brown, and lower-income white communities. These concerns are valid. In his testimony before the same committee in 2018, Comptroller Joseph Otting infamously said that he had never witnessed racial discrimination in the finance industry despite a decades-long career in banking. The current CRA proposal would operationalize this disbelief.
Otting shouldn’t have to look far to find evidence of racial discrimination. Numerous news reports document the hazards of #BankingWhileBlack. The Detroit Free Press recently described how TCF Bank refused to cash checks that Sauntore Thomas, a black man, had just received from a racial discrimination lawsuit settlement. Instead of depositing or cashing the settlement checks, employees at a TCF branch located in the white suburban community of Livonia called the police and initiated a fraud investigation.
Banks’ discrimination against their customers is not new, and the incident at TCF Bank is not an isolated event. This incident fits into a longstanding pattern in the finance industry, dating back to when white people enslaved black and brown people and used their bodies as collateral for their loans. Ongoing racial discrimination is still deeply embedded in the structure of the finance industry, and the current CRA proposal would make this discrimination worse.
Customers’ lived experiences and extensive research document racial discrimination in the finance industry. As part of my own research supported by Poverty Solutions at the University of Michigan, I interviewed 36 current and former bank employees in Michigan. Employees represented 21 unique banks of all sizes and they worked in a range of positions, including teller, universal banker, and branch manager. Some had been working in banking for just a few months, while others had been working in the industry for decades.
Employees across banks and positions consistently described racist business practices. This pattern exemplifies the finance industry’s systemic racism, instead of isolated events constrained to a specific bank, product, or type of customer interaction.
Most of the employees I spoke with were white women who worked at the front lines of customer service. They were responsible for greeting customers, delivering products and services, and ultimately determining which customers were worthy of responsible banking. Employees described how banks discouraged black and brown customers from coming into the branches to manage their money. An employee of a large national bank recounted being transferred to a different branch because she was “too welcoming,” saying, “They told me to leave because I was bringing the wrong clientele there … They were referring to African Americans.” An employee at a small bank described how her coworker declined to cash checks for a Latino customer because of the way he was dressed.
Many employees tried unsuccessfully to disguise their racism and other forms of discrimination by using coded language meant to imply unbiased decision-making. Employees regularly described providing better customer service when they thought customers were more trustworthy, responsible, and wealthier — characteristics clearly related to racist and classist stereotypes.
The finance industry has also been criticized as a predominantly white institution that lacks racial diversity among employees. The black and brown bank employees I spoke with described frustrations that were likely attributed to discrimination. A black woman who had worked in banking for 13 years described frustration with her lack of career advancement. When she applied for a branch manager position, she was told she wasn’t qualified despite having performed the role on an interim basis for several months.
Another black woman with 21 years’ experience as a teller at a large national bank described being abruptly terminated when she had a family health crisis, “I worked hard. I was dedicated. I did my job … My husband had had a serious amount of surgeries. I took a leave to try to help him heal. They called me back to work. Literally, he had just had surgery … and they terminated me.”
The CRA, which oversees banking and lending activities in communities, could be used to force the finance industry to reckon with this ongoing legacy of discrimination. However, the OCC’s proposal removes possibilities for this reckoning and ensures that discrimination will continue. Like Otting’s inability to see discrimination, the OCC’s proposal adopts a race-neutral approach to overseeing banking and lending activities and undermines both the spirit and the letter of this historic legislation.
One of the ways that the proposal ensures discrimination is by expanding what counts for CRA-related activities. Banks receive CRA ratings by earning credits for their banking and lending activities in low- and moderate-income communities. Most banks perform satisfactorily under the current ratings system despite evidence of the industry’s ongoing discrimination.
Instead of developing a stringent ratings system that explicitly targets discrimination, the OCC’s proposal inflates ratings and renders them even more meaningless. Banks get credit for financing roads and bridges that are assumed to benefit low- and moderate-income communities. Or for financing the construction of sports stadiums located in low- and moderate-income communities. Indeed, infrastructure and construction projects can be discriminatory themselves: taking land under the guise of progress, raising the costs of living, and displacing residents. The OCC’s proposal gives banks credit for their lending activities while ignoring how these projects disproportionately and negatively impact black and brown communities — perhaps even enabling new and insidious avenues for discrimination.
There is a common misconception that federal agencies cannot — or should not — regulate the finance industry and force them to provide equal services. This is not true. The finance industry’s private banks provide a necessary public service and therefore should be accountable to people and communities. Everyone needs and deserves equal and dignified access to their money and to their bank. And federal agencies can and should act to interrupt the finance industry’s longstanding pattern of racial discrimination. Supporting a strong CRA is one step toward ensuring equal access and trusting the lived experiences of banks’ black and brown customers.
Terri Friedline is an associate professor of social work at the University of Michigan and is conducting research with support from U-M’s Poverty Solutions initiative. @TerriFriedline