| LAND OF LINCOLN LEGAL
ASSISTANCE FOUNDATION September
17, 2004
Mr. Robert E. Feldman
Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 17th St. NW 20429
RE: R1N 3064-AC50
Dear Mr. Feldman:
I have been a legal services attorney for 20 years. Access to fair
credit and mainstream financial institutions is one of the most critical
issues for the clients we serve. The Community Reinvestment Act is a
powerful catalyst for accomplishing that and in an era of rampant
predatory lending traps, the Community Reinvestment Act has never been
more important for securing those basic services for low and moderate
income people. With the stated goal of the current administration to
promote affordable housing opportunities, this proposed action is
unbelievable.
As a member of the Financial Links for Low-Income People (FLLIP)
coalition, a statewide coalition of Illinois nonprofit organizations,
community groups, Individual Development Account providers, adult
educators, government agencies, financial institutions, and regulators,
I urge you to withdraw the proposed changes to the Community
Reinvestment Act (CRA) regulations. FLLIP is dedicated to expanding
financial education and asset-building opportunities for low-income
people.
I am also writing you as President of PAID nfp, a small non-profit
administering the FLLIP curriculum locally as well as an Individual
Development Account program. I am also involved in launching a Ways to
Work program locally, which is a car financing program for workers with
blemished credit. All of these activities rely heavily on cooperation
and support from local financial institutions. Reviewing the list of
effected institutions in my community, I identify 5 local banks that we
work with. Banklllinois in particular is a major partner for the IDA
program.
The proposed changes will eliminate the investment and service parts
of the CRA exam for state-charted banks with assets between $250 million
and $1 billion. If approved, over 97 percent of all banks in Illinois
would be subject to a watered-down CRA exam. The proposed change would
affect 70 banks in Illinois, including several banks that have
contributed to the FLLIP coalition's programs (Allstate Bank, Itasca
Bank & Trust, and Lisle Savings Bank). Those banks provided grants
ranging from $1000 to $25,000 and totaling almost $30,000. The grants
were used for activities including: community-based free financial
education classes; matching funds for Individual Development Accounts (IDAs)
to help low-income workers buy a house, start a business, go to college,
or buy a car; and scholarships for financial education train-the-trainer
sessions for nonprofit staff.
With fewer government and foundation resources available, nonprofit
financial education program providers and IDA program providers rely on
our bank partners for grants, in-kind donations, marketing and training
assistance, and access to convenient branches and affordable products
and services. We believe that the proposed rule would result in Illinois
nonprofits receiving fewer grants and resources for these needed
programs.
Banks frequently cite both CRA and business opportunities as factors
in their support financial education and asset-building programs. An
evaluation of the FLLIP program by the University of Illinois documented
that the program helped graduates increase financial literacy, budget
better, save more, open bank accounts, make investments, and decrease
use of check cashers and payday loans. Thus, a decrease in support for
financial education and asset-building programs for low-income people
would result in banks missing opportunities to gain new customers and
deposits.
The elimination of the service test would also have harmful
consequences for low- and moderate-income communities that lack
mainstream banking centers and affordable financial services. CRA
examiners would no longer expect mid-size banks to maintain or build
branches in low- and moderate-income communities. Mid-size banks would
have less incentive to offer low-income consumers affordable checking
and savings accounts and other banking services, such as remittances
used by immigrants to send money home.
In place of the investment and service parts of the CRA exam, the
FDIC proposes to add a community development criterion under which
mid-size banks would have to engage in only one of three activities:
community development loans, investments, or services. In addition, you
propose to allow banks to receive CRA credit for activities in rural
areas that are not targeted to the low- and moderate-income populations
that CRA was intended to help. These proposed changes, too, would result
in fewer banks and fewer resources supporting financial education and
asset-building programs for low-income people.
For these reasons, I oppose the proposed changes to CRA and ask that
you withdraw the proposed rule.
Sincerely
Valerie D. McWilliams
President, PAID nfp
Cc: Dory Rand, FLLIP Coordinator Congressman Timothy Johnson
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