“We are disappointed by this concerning discovery and thankful for the vigilance of the CFPB.”
By Kevin Stein,
Chief of Legal and Strategy
A tale of two (failed bank emergency) mergers
In a big victory, First Citizens Bank stepped up and committed to fund an additional $6.5 billion for California and Massachusetts communities after our $11 billion Community Benefits Agreement (CBA) with Silicon Valley Bank (SVB) appeared to vanish earlier this year when it failed. The SVB CBA was the product of a lot of hard work by Rise Economy, The Greenlining Institute and our respective members during the prior merger of SVB and Boston Private Bank — and we were not willing to let it go quietly.
When SVB started shedding deposits and was taken over by the Federal Deposit Insurance Corporation (FDIC, Rise Economy and our members sprang into action, sending letters to and meeting with the leadership of the FDIC, securing more than 20,000 Daily Kos signatures and seeing influential letters of support penned by Congresswoman Maxine Waters, the California Congressional Democrat delegation led by Congresswoman Katie Porter, and from other local elected officials.
When the emergency merger was approved without the possibility of any public comment, we knew that we faced an uphill battle to preserve the SVB CBA. To its credit, First Citizens Bank stepped up and agreed to substantially honor the SVB CBA by committing the $6.5 billion addition, an amount we think fairly accounts for reinvestment SVB engaged in before it failed, and the smaller size of the SVB that First Citizens Bank bought. Read the press release for more information on the CBA.
Importantly, these commitments were all made in addition to the existing $8 billion CBA First Citizens has with Rise Economy for California.
Will JPMorgan Chase Ever Agree to a CBA?
In contrast, JPMorgan Chase has made no similar commitments to California, either before its purchase of First Republic Bank, or after. In fact, JPMorgan Chase entered the California market 15 years ago when it bought the failed Washington Mutual (WaMu). WaMu had a CRA agreement with Rise Economy (then known as the California Reinvestment Coalition) and its CEO would meet with our members annually. At that time, Chase refused to enter into a new CRA/CBA commitment with California community groups.
Fast forward to May of this year, when it was announced that JPMorgan Chase was buying the failing First Republic Bank. We urged Chase to honor all affordable housing projects, investments and grants in the First Republic pipeline, to keep First Republic branches open, to stop financing new fossil fuel extraction projects and to enter into a CBA for California.
We’re unclear on Chase’s actions on what we urged, but we do know it closed 21 branches and refused to substantially move away from its position as the world’s worst funder of climate change-inducing fossil fuels. We met with JPMorgan Chase alongside our members in early November and had an honest discussion about these issues. Chase has offered to continue discussions going forward. Will anything change for California communities?
SVB and First Republic were similar in size, both were California chartered banks and both served wealthy clients. However, the responsiveness to community concerns of the two acquiring banks has been markedly different.
Not bad, but not that good
The Community Reinvestment Act (CRA) requires banks to reinvest in communities, hire community development staff, help address community credit needs and to listen to community groups in their areas.
In big news, and after years of debate, the banking regulators finalized the new Community Reinvestment Act rules in October. We’re still reviewing the 1,500 pages of the rule but think the new rules will be both an improvement on the existing CRA framework, but also far less than we had hoped.
The road to this final rule was a long and winding one. The CRA rules had not been substantially amended for over 25 years. Raise your hand if you remember the public hearing on modernizing the CRA rules held in Los Angeles in 2010. And who could forget that in 2020, Rise Economy teamed up with Democracy Forward and NCRC to sue the Trump Administration’s Office of the Comptroller of the Currency (OCC) to halt its harmful CRA rule that would have taken CRA backward.
What we’ve learned so far
The new rules promise to:
- Raise reinvestment standards and increase reinvestment in the community by ending CRA grade inflation, to focus bank small business lending on small business borrowers (under $250,000 in gross revenue),
- Expand CRA obligations beyond branches to where banks do substantial lending,
- Promote Special Purpose Credit Programs (SPCPs) which allow banks to craft and target good loan products for Black Indigenous People Of Color (BIPOC) communities and other underserved borrower and neighborhood groups,
- Support CDFIs and to encourage banks to support “weather” resiliency to help underserved communities better prepare for and respond to climate change threats.
But the No. 1 recommendation from Rise Economy members and our allies nationwide was that CRA implementation should finally and explicitly consider how well banks are serving BIPOC consumers and neighborhoods, not just low- and moderate-income (LMI) ones. On this score, the new rule fails. It also fails to meaningfully downgrade banks for engaging in harmful practices such as fee-going and financing fossil fuels which foment climate change.
Read our press release on the new rules.
Citibank did what now?
In a stunning and disconcerting development, this month the Consumer Financial Protection Bureau (CFPB) announced a fine of Citibank in the amount of $25.9 million for “intentionally and illegally discriminating against credit card applicants the bank identified as Armenian American, many of whom reside in or near Glendale, California.”
Rise Economy CEO Paulina Gonzalez-Brito noted: “Regrettably, this serves as a stark reminder that discrimination persists within our banking system. We are grateful the CFPB is diligently working to eradicate such behavior. As the largest statewide racial and economic justice coalition in the nation, we hope that other federal regulatory bodies will follow suit as it is clear that more robust oversight, investigation and enforcement of fair lending and fair housing anti-discrimination measures are needed. This is essential to guarantee that all residents have equal access to credit and deposit products in America.”
According to the CFPB, from 2015 through 2021, Citi singled out for discrimination applicants for certain credit card products, based on their surnames, whom it suspected of being of Armenian descent. Citi supervisors conspired to hide the discrimination by instructing employees not to discuss the discriminatory practices in writing or on recorded phone lines. Citi employees also lied about the basis of denial, providing false reasons to denied applicants. Under today’s order, Citi will pay $1.4 million to harmed consumers along with a $24.5 million penalty.
In addition to the CFPB’s decisions, Rise Economy has scrutinized other issues relating to Citibank.
Read our statement on this egregious set of actions.
Rise Economy engages in a community bank merger
Last month, Central Valley Community Bancorp (CVCB) and Community West Bancshares announced their agreement to combine, as Central Valley Community Bank will seek to acquire Community West through application filings to the FDIC and the Federal Reserve. The FDIC application was filed by the bank on Nov. 13, and the application to federal regulators was filed a few days later. If the merger is approved, the bank will take the name of Community West Bank.
The banks indicated that there are no plans to close branches. Yet it appears that CVCB consolidated two Visalia branches into one this month.
Currently, Community West has seven offices in Santa Barbara, Ventura and San Luis Obispo counties. Central Valley Community Bank has 20 branches in Fresno, Madera, Merced, Placer, Sacramento, San Joaquin, Stanislaus, and Tulare counties.
Central Valley Community Bank has accepted our request to meet and we look forward to a constructive discussion on Nov. 30. Our members have identified 10 areas of concern including:
- Bank branch openings,
- Small Business Administration (SBA) lending,
- Support for Native American communities,
- Low Income Housing Tax Credit investments for affordable housing,
- Community land trusts and community ownership,
- Manufactured housing,
- Climate resiliency,
- Special Purpose Credit Programs,
- And, equity equivalent investments for CDFI, CDCS and other nonprofits, and outreach in rural areas of the state.
Rise Economy members with questions or concerns about this merger can contact us.
CEO Letter Tracker
I always wanted to have my own “tracker.” With our monitoring of responses to our “CEO letter,” I finally found one.
As loyal readers of the Bank Rundown know, Rise Economy and 100 of our members and allies sent a letter to 44 bank CEOs expressing concern about harmful litigation and lobbying practices undertaken by banking trade organizations in their name that would undermine the work of Rise Economy members and allied organizations.
The letter sought clarification on each bank’s position relating to critical areas of concern to our organization and our members including:
- An independent Consumer Financial Protection Bureau (CFPB),
- Efforts to eradicate discrimination as an unfair and deceptive practice,
- The final Section 1071 small business data collection rule which will aid enforcement against lending discrimination,
- Policies that slow climate change and climate change-related disasters.
We also asked if bank lobbying and litigation decisions are informed by the opinions of bank staff closest to the community. Read the letter.
Of 44 letters sent:
- Ten banks responded in writing: Beneficial State Bank, East West Bank, U.S. Bank, HomeStreet Bank, PNC, Amalgamated Bank, Cathay Bank, Pacific Premier Bank, Citibank, and BMO Harris. Capital One arranged a call to discuss its responses to the questions. Bank of America recently reached out to schedule a call to discuss.
- Six of the written responses directly addressed all of the 5 questions we posed: Beneficial State Bank, East West Bank, HomeStreet Bank, PNC, Amalgamated Bank, and Pacific Premier Bank. Capital One, in a virtual meeting, responded substantively to each question posed.
- Only two banks responded to questions posed with clear answers that are aligned with the opinions and perspectives of Rise Economy and our members: Beneficial State Bank and Amalgamated Bank each responded in a timely fashion, answered each question with an affirmative “YES,” and offered commentary on the issues at play.
We’ll continue to monitor and report on responses to our letter.
BofA’s HMDA Headaches
Just this week, the CFPB ordered Bank of America to pay $12 Million for reporting false mortgage data after finding that loan officers routinely falsified forms about mortgage applicants.
For at least four years, hundreds of Bank of America loan officers failed to ask mortgage applicants certain demographic questions as required under federal law, and then falsely reported that the applicants had chosen not to respond.
Rise Economy and our members rely on HMDA data to evaluate whether banks and other lenders are adequately meeting the credit needs of communities or whether barriers are put in the way of BIPOC households seeking to build wealth. We are disappointed by this concerning discovery and thankful for the vigilance of the CFPB.
The CFPB order requires Bank of America to take steps to avoid its illegal mortgage data reporting practices and to pay a $12 million penalty to the CFPB’s victims relief fund.