Ensuring Diversity in Community Banking Act

IIB 116TH CONGRESS 2D SESSION H. R. 5322 IN THE SENATE OF THE UNITED STATES SEPTEMBER 22, 2020 Received; read twice and referred to the Committee on Banking, Housing, and Urban Affairs AN ACT To establish or modify requirements relating to minority depository institutions, community development financial institutions, and impact banks, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 VerDate Sep 11 2014 03:56 Sep 23, 2020 Jkt 099200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H5322.RFS H5322 pamtmann on DSKBC07HB2PROD with BILLS 2 HR 5322 RFS SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 1 (a) SHORT TITLE.—This Act may be cited as the 2 ‘‘Ensuring Diversity in Community Banking Act’’. 3 (b) TABLE OF CONTENTS.—The table of contents for 4 this Act is as follows: 5 Sec. 1. Short title; table of contents. Sec. 2. Sense of Congress on funding the loan-loss reserve fund for small dollar loans. Sec. 3. Definitions. Sec. 4. Inclusion of women’s banks in the definition of minority depository in- stitution. Sec. 5. Establishment of impact bank designation. Sec. 6. Minority Depositories Advisory Committees. Sec. 7. Federal deposits in minority depository institutions. Sec. 8. Minority Bank Deposit Program. Sec. 9. Diversity report and best practices. Sec. 10. Investments in minority depository institutions and impact banks. Sec. 11. Report on covered mentor-protege programs. Sec. 12. Custodial deposit program for covered minority depository institutions and impact banks. Sec. 13. Streamlined community development financial institution applications and reporting. Sec. 14. Task force on lending to small business concerns. Sec. 15. Discretionary surplus funds. Sec. 16. Determination of Budgetary Effects. SEC. 2. SENSE OF CONGRESS ON FUNDING THE LOAN-LOSS 6 RESERVE FUND FOR SMALL DOLLAR LOANS. 7 The sense of Congress is the following: 8 (1) The Community Development Financial In- 9 stitutions Fund (the ‘‘CDFI Fund’’) is an agency of 10 the Department of the Treasury, and was estab- 11 lished by the Riegle Community Development and 12 Regulatory Improvement Act of 1994. The mission 13 of the CDFI Fund is ‘‘to expand economic oppor- 14 tunity for underserved people and communities by 15 supporting the growth and capacity of a national 16 VerDate Sep 11 2014 03:56 Sep 23, 2020 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H5322.RFS H5322 pamtmann on DSKBC07HB2PROD with BILLS 3 HR 5322 RFS network of community development lenders, inves- 1 tors, and financial service providers’’. A community 2 development financial institution (a ‘‘CDFI’’) is a 3 specialized financial institution serving low-income 4 communities and a Community Development Entity 5 (a ‘‘CDE’’) is a domestic corporation or partnership 6 that is an intermediary vehicle for the provision of 7 loans, investments, or financial counseling in low-in- 8 come communities. The CDFI Fund certifies CDFIs 9 and CDEs. Becoming a certified CDFI or CDE al- 10 lows organizations to participate in various CDFI 11 Fund programs as follows: 12 (A) The Bank Enterprise Award Program, 13 which provides FDIC-insured depository institu- 14 tions awards for a demonstrated increase in 15 lending and investments in distressed commu- 16 nities and CDFIs. 17 (B) The CDFI Program, which provides 18 Financial and Technical Assistance awards to 19 CDFIs to reinvest in the CDFI, and to build 20 the capacity of the CDFI, including financing 21 product development and loan loss reserves. 22 (C) The Native American CDFI Assistance 23 Program, which provides CDFIs and spon- 24 soring entities Financial and Technical Assist- 25 VerDate Sep 11 2014 03:56 Sep 23, 2020 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H5322.RFS H5322 pamtmann on DSKBC07HB2PROD with BILLS 4 HR 5322 RFS ance awards to increase lending and grow the 1 number of CDFIs owned by Native Americans 2 to help build capacity of such CDFIs. 3 (D) The New Market Tax Credit Program, 4 which provides tax credits for making equity in- 5 vestments in CDEs that stimulate capital in- 6 vestments in low-income communities. 7 (E) The Capital Magnet Fund, which pro- 8 vides awards to CDFIs and nonprofit affordable 9 housing organizations to finance affordable 10 housing solutions and related economic develop- 11 ment activities. 12 (F) The Bond Guarantee Program, a 13 source of long-term, patient capital for CDFIs 14 to expand lending and investment capacity for 15 community and economic development purposes. 16 (2) The Department of the Treasury is author- 17 ized to create multi-year grant programs designed to 18 encourage low-to-moderate income individuals to es- 19 tablish accounts at federally insured banks, and to 20 improve low-to-moderate income individuals’ access 21 to such accounts on reasonable terms. 22 (3) Under this authority, grants to participants 23 in CDFI Fund programs may be used for loan-loss 24 reserves and to establish small-dollar loan programs 25 VerDate Sep 11 2014 03:56 Sep 23, 2020 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H5322.RFS H5322 pamtmann on DSKBC07HB2PROD with BILLS 5 HR 5322 RFS by subsidizing related losses. These grants also allow 1 for the providing recipients with the financial coun- 2 seling and education necessary to conduct trans- 3 actions and manage their accounts. These loans pro- 4 vide low-cost alternatives to payday loans and other 5 nontraditional forms of financing that often impose 6 excessive interest rates and fees on borrowers, and 7 lead millions of Americans to fall into debt traps. 8 Small-dollar loans can only be made pursuant to 9 terms, conditions, and practices that are reasonable 10 for the individual consumer obtaining the loan. 11 (4) Program participation is restricted to eligi- 12 ble institutions, which are limited to organizations 13 listed in section 501(c)(3) of the Internal Revenue 14 Code and exempt from tax under 501(a) of such 15 Code, federally insured depository institutions, com- 16 munity development financial institutions and State, 17 local, or Tribal government entities. 18 (5) Since its founding, the CDFI Fund has 19 awarded over $3,300,000,000 to CDFIs and CDEs, 20 allocated $54,000,000,000 in tax credits, and 21 $1,510,000,000 in bond guarantees. According to 22 the CDFI Fund, some programs attract as much as 23 $10 in private capital for every $1 invested by the 24 CDFI Fund. The Administration and the Congress 25 VerDate Sep 11 2014 03:56 Sep 23, 2020 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H5322.RFS H5322 pamtmann on DSKBC07HB2PROD with BILLS 6 HR 5322 RFS should prioritize appropriation of funds for the loan 1 loss reserve fund and technical assistance programs 2 administered by the Community Development Finan- 3 cial Institution Fund. 4 SEC. 3. DEFINITIONS. 5 In this Act: 6 (1) COMMUNITY DEVELOPMENT FINANCIAL IN- 7 STITUTION.—The term ‘‘community development fi- 8 nancial institution’’ has the meaning given under 9 section 103 of the Riegle Community Development 10 and Regulatory Improvement Act of 1994 (12 11 U.S.C. 4702). 12 (2) MINORITY DEPOSITORY INSTITUTION.—The 13 term ‘‘minority depository institution’’ has the 14 meaning given under section 308 of the Financial 15 Institutions Reform, Recovery, and Enforcement Act 16 of 1989 (12 U.S.C. 1463 note), as amended by this 17 Act. 18 SEC. 4. INCLUSION OF WOMEN’S BANKS IN THE DEFINITION 19 OF MINORITY DEPOSITORY INSTITUTION. 20 Section 308(b)(1) of the Financial Institutions Re- 21 form, Recovery, and Enforcement Act of 1989 (12 U.S.C. 22 1463 note) is amended— 23 (1) by redesignating subparagraphs (A), (B), 24 and (C) as clauses (i), (ii), and (iii), respectively; 25 VerDate Sep 11 2014 03:56 Sep 23, 2020 Jkt 099200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H5322.RFS H5322 pamtmann on DSKBC07HB2PROD with BILLS 7 HR 5322 RFS (2) by striking ‘‘means any’’ and inserting the 1 following: ‘‘means— 2 ‘‘(A) any’’; and 3 (3) in clause (iii) (as so redesignated), by strik- 4 ing the period at the end and inserting ‘‘; or’’; and 5 (4) by inserting at the end the following new 6 subparagraph: 7 ‘‘(B) any bank described in clause (i), (ii), 8 or (iii) of section 19(b)(1)(A) of the Federal 9 Reserve Act— 10 ‘‘(i) more than 50 percent of the out- 11 standing shares of which are held by 1 or 12 more women; and 13 ‘‘(ii) the majority of the directors on 14 the board of directors of which are 15 women.’’. 16 SEC. 5. ESTABLISHMENT OF IMPACT BANK DESIGNATION. 17 (a) IN GENERAL.—Each Federal banking agency 18 shall establish a program under which a depository institu- 19 tion with total consolidated assets of less than 20 $10,000,000,000 may elect to be designated as an impact 21 bank if the total dollar value of the loans extended by such 22 depository institution to low-income borrowers is greater 23 than or equal to 50 percent of the assets of such bank. 24 VerDate Sep 11 2014 03:56 Sep 23, 2020 Jkt 099200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H5322.RFS H5322 pamtmann on DSKBC07HB2PROD with BILLS 8 HR 5322 RFS (b) NOTIFICATION OF ELIGIBILITY.—Based on data 1 obtained through examinations of depository institutions, 2 the appropriate Federal banking agency shall notify a de- 3 pository institution if the institution is eligible to be des- 4 ignated as an impact bank. 5 (c) APPLICATION.—Regardless of whether or not it 6 has received a notice of eligibility under subsection (b), 7 a depository institution may submit an application to the 8 appropriate Federal banking agency— 9 (1) requesting to be designated as an impact 10 bank; and 11 (2) demonstrating that the depository institu- 12 tion meets the applicable qualifications. 13 (d) LIMITATION ON ADDITIONAL DATA REQUIRE- 14 MENTS.—The Federal banking agencies may only impose 15 additional data collection requirements on a depository in- 16 stitution under this section if such data is— 17 (1) necessary to process an application sub- 18 mitted by the depository institution to be designated 19 an impact bank; or 20 (2) with respect to a depository institution that 21 is designated as an impact bank, necessary to ensure 22 the depository institution’s ongoing qualifications to 23 maintain such designation. 24 VerDate Sep 11 2014 03:56 Sep 23, 2020 Jkt 099200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H5322.RFS H5322 pamtmann on DSKBC07HB2PROD with BILLS 9 HR 5322 RFS (e) REMOVAL OF DESIGNATION.—If the appropriate 1 Federal banking agency determines that a depository in- 2 stitution designated as an impact bank no longer meets 3 the criteria for such designation, the appropriate Federal 4 banking agency shall rescind the designation and notify 5 the depository institution of such rescission. 6 (f) RECONSIDERATION OF DESIGNATION; AP- 7 PEALS.—Under such procedures as the Federal banking 8 agencies may establish, a depository institution may— 9 (1) submit to the appropriate Federal banking 10 agency a request to reconsider a determination that 11 such depository institution no longer meets the cri- 12 teria for the designation; or 13 (2) file an appeal of such determination. 14 (g) RULEMAKING.—Not later than 1 year after the 15 date of the enactment of this Act, the Federal banking 16 agencies shall jointly issue rules to carry out the require- 17 ments of this section, including by providing a definition 18 of a low-income borrower. 19 (h) REPORTS.—Each Federal banking agency shall 20 submit an annual report to the Congress containing a de- 21 scription of actions taken to carry out this section. 22 (i) FEDERAL DEPOSIT INSURANCE ACT DEFINI- 23 TIONS.—In this section, the terms ‘‘depository institu- 24 tion’’, ‘‘appropriate Federal banking agency’’, and ‘‘Fed- 25 VerDate Sep 11 2014 03:56 Sep 23, 2020 Jkt 099200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H5322.RFS H5322 pamtmann on DSKBC07HB2PROD with BILLS 10 HR 5322 RFS eral banking agency’’ have the meanings given such terms, 1 respectively, in section 3 of the Federal Deposit Insurance 2 Act (12 U.S.C. 1813). 3 SEC. 6. MINORITY DEPOSITORIES ADVISORY COMMITTEES. 4 (a) ESTABLISHMENT.—Each covered regulator shall 5 establish an advisory committee to be called the ‘‘Minority 6 Depositories Advisory Committee’’. 7 (b) DUTIES.—Each Minority Depositories Advisory 8 Committee shall provide advice to the respective covered 9 regulator on meeting the goals established by section 308 10 of the Financial Institutions Reform, Recovery, and En- 11 forcement Act of 1989 (12 U.S.C. 1463 note) to preserve 12 the present number of covered minority institutions, pre- 13 serve the minority character of minority-owned institu- 14 tions in cases involving mergers or acquisitions, provide 15 technical assistance, and encourage the creation of new 16 covered minority institutions. The scope of the work of 17 each such Minority Depositories Advisory Committee shall 18 include an assessment of the current condition of covered 19 minority institutions, what regulatory changes or other 20 steps the respective agencies may be able to take to fulfill 21 the requirements of such section 308, and other issues of 22 concern to covered minority institutions. 23 (c) MEMBERSHIP.— 24 VerDate Sep 11 2014 03:56 Sep 23, 2020 Jkt 099200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H5322.RFS H5322 pamtmann on DSKBC07HB2PROD with BILLS 11 HR 5322 RFS (1) IN GENERAL.—Each Minority Depositories 1 Advisory Committee shall consist of no more than 2 10 members, who— 3 (A) shall serve for one two-year term; 4 (B) shall serve as a representative of a de- 5 pository institution or an insured credit union 6 with respect to which the respective covered 7 regulator is the covered regulator of such de- 8 pository institution or insured credit union; and 9 (C) shall not receive pay by reason of their 10 service on the advisory committee, but may re- 11 ceive travel or transportation expenses in ac- 12 cordance with section 5703 of title 5, United 13 States Code. 14 (2) DIVERSITY.—To the extent practicable, 15 each covered regulator shall ensure that the mem- 16 bers of the Minority Depositories Advisory Com- 17 mittee of such agency reflect the diversity of covered 18 minority institutions. 19 (d) MEETINGS.— 20 (1) IN GENERAL.—Each Minority Depositories 21 Advisory Committee shall meet not less frequently 22 than twice each year. 23 (2) NOTICE AND INVITATIONS.—Each Minority 24 Depositories Advisory Committee shall— 25 VerDate Sep 11 2014 03:56 Sep 23, 2020 Jkt 099200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H5322.RFS H5322 pamtmann on DSKBC07HB2PROD with BILLS 12 HR 5322 RFS (A) notify the Committee on Financial 1 Services of the House of Representatives and 2 th [Text truncated for display. Full text available on Congress.gov.]