U.S. regulators are set to rework the way banks lend money to lower-income communities.
A plan to update the 1977 Community Reinvestment Act was announced Thursday (May 5), with the goal of making sure lending is more evenly distributed to lower-income consumers and small businesses.
As The Wall Street Journal reported Thursday, the overhaul comes after the government threw out a Trump administration revision that had divided the industry and regulators alike.
The rules as they stand focus on banking activity around physical bank branches, but bankers and community advocates say those rules no longer apply to a world where so much financial activity happens over digital channels.
The Community Reinvestment Act was written to put a stop to “redlining,” a practice by banks of avoiding lending in certain areas, in many cases lower-income areas, per the Journal report. But in recent years, the law has led to conflict between community groups that want stronger enforcement and bankers that say the regulations are outdated.
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