Texas Senate Bill SB1714

Texas 2021 - 87th Regular

Caption

Relating to the Texas Community Reinvestment Act; authorizing a fee.

Impact

This legislation requires the Texas Banking Commissioner to implement rules that ensure covered financial institutions maintain responsibility for their service obligations. Specifically, institutions that provide services primarily through digital channels are also required to consider underserved communities in their operations. By mandating assessments of financial institutions' performance, this bill aims to evaluate how effectively these entities fulfill their community obligations, thereby prioritizing community engagement and financial accessibility.

Summary

SB1714, known as the Texas Community Reinvestment Act, introduces significant regulations aimed at enhancing the accountability of covered financial institutions in meeting the financial needs of their local communities. The bill stipulates that banks, savings banks, and credit unions must actively address the financial service requirements of the communities they serve. This includes a specific obligation to ensure accessibility for low-income and moderate-income neighborhoods, thereby promoting equitable financial service distribution.

Contention

One notable area of contention is whether these requirements might impose undue burdens on financial institutions, particularly smaller banks and credit unions. Critics argue that the additional regulatory obligations could limit the ability of these institutions to operate efficiently and serve a broader customer base. Conversely, supporters maintain that such regulations are necessary to enhance community development and prevent discrimination in lending practices.

Implementation

The bill empowers the Banking Commissioner to assess the performance of financial institutions via mandatory examinations and public evaluations. Furthermore, state funds deposited in these institutions will be contingent upon their ratings regarding community service commitments. Therefore, institutions that fail to meet community needs could face restrictions in state funding, promoting a more robust consideration of social responsibility among financial entities.