After 3 years, state poised to enforce law aiming to end lending
discrimination
Send a link to a friend
[May 01, 2024]
By PETER HANCOCK
Capitol News Illinois
phancock@capitolnewsillinois.com
 SPRINGFIELD – In 1977, then-President Jimmy Carter signed into law the
Community Reinvestment Act, a federal law that sought to wipe away the
last vestiges of racial discrimination and redlining in America’s home
mortgage industry.
The idea was simple. By requiring lenders – primarily banks – to make
credit available in all parts of the communities they served, including
low- and moderate-income neighborhoods, the government could redirect
the flow of private capital back into areas that had suffered from
decades of systemic disinvestment.
Nearly half a century later, many people in Illinois argue the federal
CRA has failed to live up to its promise. Whether that’s because the law
was too narrow in scope, or because the lending business itself has
changed dramatically over the decades, urban metropolitan areas like
Chicago are still plagued with crumbling neighborhoods where few lenders
are willing to invest.
“My area is the southeast side of Chicago, so if you want to talk about
Woodlawn, Hyde Park, South Chicago, I mean, these are places where you
have a significant amount of folks who are not white and upper-middle
class. So yeah, there's been a problem,” Rep. Curtis Tarver, D-Chicago,
said during a recent interview.
Tarver was among the sponsors of a 2021 bill that enacted a new
state-level Community Reinvestment Act. Passed during a special lame
duck session in January that year, it was part of the Legislative Black
Caucus’ “four pillars” of social and economic reform measures that grew
out of unrest that began sweeping across minority communities throughout
the United States the previous summer.
“There were a few things that happened in 2020,” recalled Jane Doyle of
the Chicago-based Woodstock Institute, one of the main backers of the
bill. “Of course, the pandemic, the ways that the pandemic exposed
racial disparities in our economy and our health care system, pretty
much all parts of society. There was the murder of George Floyd and the
Black Lives Matter protests that ensued after that.”
But more specific to Chicago and the lending industry, Doyle said, was
an investigative news story entitled “Where Banks Don’t Lend,” by public
radio station WBEZ and the nonprofit news organization City Bureau. It
was released June 3, 2020, less than two weeks after Floyd’s death.
“The sort of big summary data point that came out of that is that there
was more mortgage capital invested in one majority-white community in
Chicago than all majority-Black communities combined,” Doyle said.
It was against that backdrop that the Legislative Black Caucus pushed
through the Illinois Community Reinvestment Act, a part of its “Economic
Access, Equity, and Opportunity” pillar.
Unlike the federal law, which applies primarily to nationally chartered
banks, the state law applies to state-chartered banks and savings banks,
credit unions and non-bank mortgage lenders.
[to top of second column]
|
Mario Treto Jr., secretary of the Illinois Department of Financial
and Professional Regulation, testifies before the Joint Committee on
Administrative Rules in April about the final adoption of rules to
implement the 2021 Illinois Community Reinvestment Act. (Capitol
News Illinois photo by Peter Hancock)
It provides that every institution covered by the law has a “continuing
and affirmative obligation to meet the financial services needs of the
communities in which its offices, branches, and other facilities are
maintained.” It also empowers the Illinois Department of Financial and
Professional Regulation to conduct examinations to measure each
institution’s compliance with the law.
Much like the federal law, the state law does not impose specific
mandates or establish any type of lending quotas on financial
institutions. It does, however, require them to report on a periodic
basis such things as the number and amount of mortgage loans and small
business loans they make, the extent of their marketing activities to
make community members aware of their services, and their participation
in community development and redevelopment programs.
It also gives IDFPR authority to review those reports and assign rating
scores to each institution, classifying their compliance record as
either “outstanding,” “satisfactory,” “needs to improve,” or
“substantial noncompliance.”
Gov. JB Pritzker signed the bill into law March 23, 2021, and the law
was supposed to be in full effect by Jan. 1, 2022.
That, however, proved to be more difficult than originally thought. The
process of writing administrative rules to implement the law dragged on
for nearly three years while regulators and industry officials
negotiated the details of what information would have to be reported and
how that information would be handled by the agency.
Those negotiations finally came to an end in April when the legislative
Joint Committee on Administrative Rules, or JCAR, gave its blessing to
the final rules, which now await publication in the Illinois Register
before they are considered official.
“I knew it was hotly discussed and debated,” Sen. Chris Belt, D-Swansea,
the bill’s chief Senate sponsor, said in an interview. “I'm not on JCAR
so I don't know why it took so long. I know it was a lot of issues and
nuances that they were discussing. I'm just glad that is over now.”
Belt is also the lead sponsor of a follow-up bill this year, Senate Bill
3235. It calls on the state’s Commission on Equity and Inclusion to
conduct studies that will provide baseline information to identify
geographies in Illinois where significant disparities exist in access to
financial products and services, along with a listing of existing
policies and practices that may have disparate impacts or discriminatory
effects.
That bill passed out of the Senate April 18 and now awaits action in the
House.
Capitol News Illinois is
a nonprofit, nonpartisan news service covering state government. It is
distributed to hundreds of newspapers, radio and TV stations statewide.
It is funded primarily by the Illinois Press Foundation and the Robert
R. McCormick Foundation, along with major contributions from the
Illinois Broadcasters Foundation and Southern Illinois Editorial
Association.
 |
