S2722

An Act concerning community reinvestment and supplementing Title 17 of the Revised Statutes and repealing P.L.1991, c.294.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. The Legislature finds and declares that:

a. Regulated financial institutions are required by law to demonstrate that they serve the convenience and needs of the communities in which they are chartered to do business.

b. The convenience and needs of communities include the need for credit, deposit services, and other financial products.

c. Regulated financial institutions have a continuing and affirmative obligation to serve community needs.

d. It is the purpose of this act to require the appropriate State financial supervisory agency to use its authority when examining financial institutions and to encourage the institutions to help meet the financial needs of the local communities in which they are chartered consistent with the safe and sound operation of the institutions.

2. As used in this act:

“Application for a deposit facility or license" means an application to the Department of Banking and Insurance for:

(1) a charter for a State-chartered bank or savings and loan association or credit union;

(2) the establishment of a domestic branch or other facility with the ability to accept deposits for a regulated financial institution;

(3) the relocation of the home office or a branch office of a regulated financial institution;

(4) the merger or consolidation with, or the acquisition of the assets, or the assumption of the liabilities of a regulated financial institution requiring approval;

(5) the acquisition of shares in, or the assets of, a regulated financial institution requiring approval under State law; or

(6) a license, or renewal of a license, to make loans or offer other financial services.

“Assessment area” means each community, including a State, metropolitan area, or urban or rural county, in which the institution:

(1) maintains deposit-taking branches, automated teller machines, or retail offices;

(2) is represented by an agent;

(3) for areas lacking deposit-taking branches, automated teller machines, retail offices or agents, where a regulated financial institution issues a significant number of loans or other products, including deposits, relative to the total number of loans or other products made by the institution or relative to the total number of loans or other products offered by the private sector market; and

(4) has the common bond or field of membership for a credit union.

“Community benefits plan” means a plan that provides measurable goals for future amounts of safe and sound loans, investments, financial services, and other products for low- and moderate-income communities and other distressed or underserved communities.

“Community development” includes:

(1) affordable housing for low- or moderate-income individuals and avoidance of patterns of lending resulting in the loss of affordable housing units;

(2) community development services, including counseling and successful mortgage or loan modifications of delinquent loans;

(3) activities that promote integration;

(4) activities that promote economic development by financing small businesses or farms that meet the size eligibility requirements of the development company or small business investment company programs pursuant to 13 C.F.R. s.121.301, or any successor regulation, with an emphasis on small businesses that have gross annual revenues of not more than $1 million;

(5) activities that revitalize or stabilize:

(a) low- or moderate-income geographies;

(b) designated disaster areas;

(d) communities consisting disproportionately of other underserved populations; or

(e) distressed or underserved nonmetropolitan middle-income geographies or other geographies designated by the Federal Financial Institutions Examination Council, based on:

(i) rates of poverty, unemployment, and population loss; or

(ii) population size, density, and dispersion, if those activities help to meet essential community needs, including the needs of low- and moderate-income individuals;

(6) activities that promote physical, environmental, and sensory accessibility in housing stock that is integrated into the community;

(7) climate remediation and resiliency including workforce development related to carbon pollution-free energy sectors, operational and technical support for environmental organizations, energy efficiency upgrades, weatherization, renewable energy such as solar power, flood protection, creation of green spaces, gardens and tree canopies; and

(8) other activities that promote the objectives of this act, as determined by the appropriate federal financial supervisory agencies or the Department of Banking and Insurance.

“Department” means the Department of Banking and Insurance.

“Geography” means a census tract delineated by the United States Census Bureau in the most recent decennial census.

“Metropolitan area” means any such area, as defined by the federal Director of the Office of Management and Budget, and any other area designated as such by the appropriate department or federal financial supervisory agency.

“Other distressed or underserved community” means an area or census tract that, according to a periodic review and data analysis by the Department of Banking and Insurance or a federal financial supervisory agency on an interagency basis through the Federal Financial Institutions Examination Council, is experiencing economic hardship or is underserved by financial institutions. A possible metric to determine an underserved community may be loans per households or per small businesses.

“Other underserved populations” means populations that are experiencing ongoing effects of discrimination or are relatively underserved by financial institutions as measured by loans per capita or other similar metrics.

“Regulated financial institution” means a mortgage company licensed under State law and the following entities chartered under State law:

(1) a bank, including affiliates and subsidiaries that offer retail loans;

(2) a savings bank, including affiliates and subsidiaries that offer retail loans; and

(3) a credit union.

3. a. In connection with its examination of a regulated financial institution, the department shall:

(1) assess the institution's record of meeting the needs of its entire community for credit, deposit, and other financial products, including low- and moderate-income consumers and neighborhoods, other distressed or underserved communities and other underserved populations, consistent with the safe and sound operation of the institution. This includes assessment, as appropriate, of the following activities:

(a) retail lending, including home, small business, consumer, and other lending and financial products, that responds to credit needs, deposit needs, or other financial needs. Purchases of loans do not count when an institution purchases a loan that had been previously purchased by another institution;

(b) community development lending and investments, which may also consist of grants to non-profit organizations engaged in community development;

(c) retail financial services, provision of branches and other service facilities, low-cost deposit accounts and community development services;

(d) the record of the institution in offering safe and sound products, using delinquency rates, default rates and repayment and other data to assess this; and

(e) efforts by the institution to:

(i) work with delinquent borrowers to resolve the delinquency including timely loan modifications;

(ii) prevent displacement of low- and moderate-income populations and to promote integration; and

(iii) serve underserved populations such as creating special purpose credit programs in accordance with the federal “Equal Credit Opportunity Act,” as added by section 1071 of the “Dodd-Frank Wall Street Reform and Consumer Protection Act,” Pub.L.111-203, and its corresponding regulation at 12 C.F.R. s.1002, known as “regulation B;”

(2) determine if a regulated financial institution has acted in a manner unfair, deceptive, or abusive that violates consumer protection or fair lending and housing laws intended to ensure the fair, equitable, and nondiscriminatory access to credit for individuals and communities that are enforced by the Consumer Financial Protection Bureau or other federal agencies. The written evaluation shall be negatively influenced in a manner commensurate with the extent of the harm suffered by individuals and communities;

(3) solicit and consider public input on the performance of the institution being examined pursuant to the federal “Community Reinvestment Act of 1977,” Pub.L.95-128 (12 U.S.C. s.2901 et seq.); and

(4) take the record into account in the department’s evaluation of an application for a deposit facility or license by a regulated financial institution. The department shall:

(a) consider the record described in paragraphs (1) and (2), the overall rating of the institution under this section, and any improvement plans submitted pursuant to this section;

(b) provide an opportunity for public comment for a period of not less than 60 days;

(c) consider changes in the community reinvestment and fair lending performance of the institution since the most recent rating under this section; and

(d) require:

(i) a demonstration of public benefits, including a community benefits plan with measurable goals regarding increasing responsible lending and other financial products that are commensurate with the ability of the institution to accomplish those goals;

(ii) that the institution consult with community-based organizations and other community stakeholders in developing a community benefits plan; and

(iii) a public hearing for any institution that has a received a “needs-to-improve” or “low satisfactory” grade in any individual assessment area during the most recent examination.

b. In assessing and taking into account, under subsection a. of this section, the record of a nonminority-owned and non-women-owned regulated financial institution, the department may consider, as a factor, capital investment, loan participation, and other ventures undertaken by the institution in cooperation with minority- and women-owned financial institutions and low-income credit unions, provided that these activities help meet the financial needs of local communities in which the institutions are chartered.

4. a. Upon the conclusion of each examination of a regulated financial institution pursuant to section 3 of this act, the department shall prepare a written evaluation of the institution's record of meeting the needs of its entire community, including low- and moderate-income consumers and neighborhoods, other distressed or underserved communities and other underserved populations.

b. As appropriate, the department may conduct exams jointly with federal supervisory agencies in the case of depository institutions or other regulated financial institutions that are or could be subject to a federal requirement pursuant to the federal “Community Reinvestment Act of 1977,” Pub.L.95-128 (12 U.S.C. s.2901 et seq.).

c. The department shall:

(1) examine every regulated financial institution for compliance with section 3 of this act no less than once every three years; and

(2) make public an examination schedule at the beginning of each year and update the schedule each quarter, and invite public comment related to a regulated financial institution’s compliance with this act.

d. Each written evaluation required under subsection a. of this section shall have a public section and a confidential section.

e. The public section of the written evaluation shall:

(1) state the department’s conclusions for each exam criterion and any subtest identified in the regulations, as prescribed by the department to effectuate the purposes of this act;

(2) discuss the facts and data supporting the conclusions; and

(3) contain the regulated financial institution's rating and a statement describing the basis for the rating.

The information required by subparagraphs (1), (2) and (3) of this subsection shall be presented separately for assessment areas including the State, metropolitan areas, urban or rural counties or groupings of rural counties.

f. The rating of a regulated financial institution referred to in paragraph (3) of subsection e. of this section shall be one of the following:

(A) “Outstanding record of meeting community needs;”

(B) “Satisfactory record of meeting community needs;”

(D) “Needs to improve record of meeting community needs;” or

(E) “Substantial noncompliance in meeting community needs.”

As it deems appropriate, the department may amend these rating categories by adding new ones or altering the existing categories, and may also add a point scale.

g. The confidential section of the written evaluation shall contain all references that identify any consumer of the regulated financial institution, any employee or officer of the institution, or any individual or organization that has provided information in confidence to the department or a federal financial supervisory agency.

h. The confidential section shall also contain any statements obtained or made by the department in the course of an examination which, in the judgment of the department, are too sensitive or speculative in nature to disclose to the regulated financial institution or the public.

i. The confidential section may be disclosed, in whole or part, to the regulated financial institution, if the department determines that the disclosure will promote the objectives of this act. However, disclosure shall not identify an individual or organization that has provided information in confidence to the department or a federal financial supervisory agency.

5. a. The department shall contract with qualified individuals for a disparity study that shall identify underserved counties, populations, and census tracts in the State.

b. The study shall:

(1) identify segments of the population that are underserved because they are experiencing disparities in lending or discrimination by metropolitan areas and by urban and rural counties;

(2) be updated once every three years and made publicly available;

(3) inform the examinations described in section 4 of this act; and

(4) identify disparities in access to retail loans, community development financing, and branches and other bank services experienced by various groups of consumers and geographical areas.

c. In carrying out each study required under subsections a. and b. of this section, the department may make available to federal financial supervisory agencies data collected, including the following:

(1) data obtained under the “Home Mortgage Disclosure Act of 1975,” Pub.L.94-200 (12 U.S.C. s.2801 et seq.);

(2) data obtained under section 704B of the “Equal Credit Opportunity Act,” as added by section 1071 of the “Dodd-Frank Wall Street Reform and Consumer Protection Act,” Pub.L.111-203 (12 U.S.C. s.1691c-2);

(3) data obtained under the “Community Reinvestment Act of 1977,” Pub.L.95-128 (12 U.S.C. s.2901 et seq.);

(4) other available State data; and

(5) information contained in public litigation against regulated financial institutions for redlining or lending discrimination, including litigation initiated by the federal Consumer Financial Protection Bureau, the U.S. Department of Housing and Urban Affairs, the U.S. Department of Justice, or by private parties.

d. The department shall make the results of its disparity study publicly available on its website and shall issue a report of its findings to the Legislature, pursuant to section 2 of P.L.1991, c.164 (C.52:14-19.1), that shall include recommendations addressing the identification of policies, practices, and procedures that contribute to disparities and discrimination in access to credit and banking services.

6. a. The department shall require an improvement plan for a regulated financial institution that receives a rating of “low satisfactory” or lower on the written evaluation of the institution or in any individual assessment area of the institution. The plan shall result in the reasonable likelihood that the institution will obtain a rating of at least “satisfactory” in meeting community credit or other financial needs in the relevant assessment areas on the next examination.

b. A regulated financial institution that is required to submit an improvement plan required under subsection a. of this section shall submit the plan in writing to the department not later than 90 days after receiving notice that the regulated financial institution is required to submit the plan.

c. Upon receipt of an improvement plan of a regulated financial institution required pursuant to subsection a. of this section, the department shall:

(1) make the plan available to the public for review and comment for a period of not less than 60 days; and

(2) require the regulated financial institution to revise, as appropriate, the improvement plan in response to the public comments received and submit the updated plan to the department not later than 60 days after the end of that period.

7. a. In the case of any depository institution which donates, sells on favorable terms, as determined by the department, or makes available on a rent-free basis any branch of the institution which is located in any predominantly minority neighborhood to any minority depository institution or women's depository institution, the amount of the contribution or the amount of the loss incurred in connection with the activity may be a factor in determining whether the depository institution is meeting the credit needs of the institution's community for purposes of this act.

b. For purposes of this section:

“Minority institution” means a depository institution where:

(1) more than 50 percent of the ownership or control is held by one or more minority individuals;

(2) more than 50 percent of the net profit or loss of which accrues to one or more minority individuals; and

(3) a significant percentage of senior management positions are held by minority individuals.

“Women's depository institution” means a depository institution where:

(1) more than 50 percent of the ownership or control is held by one or more women;

(2) more than 50 percent of the net profit or loss of which accrues to one or more women; and

(3) a significant percentage of senior management positions are held by women.

8. a. Each regulated financial institution shall collect and maintain in machine readable form, as prescribed by the department, data on the categories of community development lending and investments, including data regarding financing affordable housing, small business development, community facilities, and economic development.

b. The department shall publicly disseminate the data described in subsection a. of this section for:

(1) each regulated financial institution on a county level and for categories of census tracts including low- and moderate-income census tracts or other distressed and underserved census tracts; and

(2) the aggregate regulated financial institutions covered by this act by individual census tracts in addition to the categories described in paragraph (1) of this subsection.

9. a. The department shall have the authority to adjust fees paid by regulated financial institutions in part based on the rating received by the institutions under this act.

b. Any regulated financial institution receiving a rating of “needs to improve” or “substantial noncompliance” shall not be eligible to receive deposits from a State agency.

10. A regulated financial institution shall provide, in the public lobby of each of its offices, if any, and on its website, a public notice that is substantially similar to the following:

State Community Reinvestment Notice

The Department of Banking and Insurance evaluates our performance in meeting the financial services needs of this community, including the needs of low-income to moderate-income households and other underserved populations and communities. The department takes this evaluation into account when deciding on certain applications submitted by us for approval by the department. Your involvement is encouraged. You may obtain a copy of our evaluation. You may also submit signed, written comments about our performance in meeting community financial services needs to the department.

11. The Commissioner of Banking and Insurance, pursuant to the “Administrative Procedure Act,” P.L.1968, c.410 (C.52:14B-1 et seq.), shall adopt rules and regulations to effectuate the provisions of this act.

12. P.L.1991, c.294 (C.17:16Q-1 et seq.) is repealed.

13. This act shall take effect immediately.

STATEMENT

This bill establishes a community reinvestment law for the State of New Jersey. It requires similar analysis and evaluation of banks, mortgage companies, and credit unions to determine and rate if these institutions are lending, investing, and providing financial services to low- and moderate-income consumers and communities. This includes underserved communities and populations.

Under the bill, the Department of Banking and Insurance (the “department”) is to review activities of the various regulated financial institutions in the State every three years. This includes reviewing various types of products and services offered by an institution including, but not limited, to: 1) retail lending, such as home and small business loans; 2) community development lending; 3) low-cost deposit accounts and other retail financial services; and 4) how an institution works with delinquent consumers. Upon the department’s examination, a rating is assigned to an institution. If a rating of “low satisfactory” or lower is given to a regulated financial institution, an improvement plan is to be developed between the institution, the department, and comments from members of the public.

Additionally, under the bill, the department is to develop a disparity study. This is to identify underserved counties, populations, and census tracts in the State. Data collected for this study may be shared with federal agencies. Upon completion, a report of the findings and recommendations is to be issued to the Legislature.

Lastly, each regulated financial institution is to post a notice in each branch, or on its website, a notice for public consumption stating, in part, that the institution’s performance is evaluated based on how it meets the needs of its community and that a copy of the evaluation is available for review.