I. INTRODUCTION
Section 711 of the Gramm-Leach-Bliley Act (GLBA) establishes specific disclosure and reporting requirements for certain Community Reinvestment Act (CRA) agreements. These provisions are found in § 48 of the Federal Deposit Insurance Act and are commonly referred to as “CRA Sunshine.” The federal bank and thrift regulatory agencies issued a joint final rule effective April 1, 2001.
The provisions require nongovernmental entities or persons (NGEPs) and insured depository institutions (and its affiliates) that are parties to certain written agreements made in fulfillment of the CRA to make the agreements available and to file annual reports about the agreements. The rule identifies the types of written agreements covered by the statute by defining critical terms, describes how the parties to a covered agreement must make it available and specifies the information to be included in the annual reports.
Each party to a covered agreement entered into after November 12, 1999, must disclose the agreement to the appropriate banking agency. Banks must disclose each agreement within 60 days of the end of the calendar quarter in which it was entered into by filing with the appropriate banking agency either a copy of each agreement or a list of agreements entered into in that quarter. If a bank was a party to a covered agreement that terminated before April 1, 2001, it must disclose the agreement to the appropriate banking agency by June 30, 2001.
The law also requires each party to a covered agreement entered into on or after May 12, 2000, to file an annual report concerning disbursement, receipt and use of funds under the agreement. Generally, each party must file its report with the appropriate banking agency within six months after the end of the fiscal year covered by the report. The bank must file its annual report with the appropriate banking agency not later than June 30, 2001, for fiscal years that end between May 12, 2000, and December 31, 2000. If a nongovernmental entity that is a party to the agreement has provided its annual report to the bank, the bank must file that report with the appropriate banking agency within 30 days of receipt.
II. COVERED AGREEMENTS
The CRA Sunshine law requires certain CRA-related agreements to be publicly disclosed and reported upon annually. Agreements subject to the statute’s disclosure and reporting requirements are called a “covered agreements.” An agreement is “covered” if it meets all of the following five criteria:
A. The Agreement is in Writing
The statute covers any agreement that is a “written contract, written arrangement, or other written understanding . . . by an insured depository institution or affiliate with a nongovernmental entity or person . . . ” A written understanding or agreement need not be a legally binding contract to be covered and the mutual understanding or agreement may be reflected in one or more documents, by one or more parties, including in a press release by a party. B. The Parties to the Agreement Include an Insured Depository Institution or an Affiliate of the Institution and a Nongovernmental Entity or Person (NGEP)
An NGEP is defined to include any corporation, partnership, trust, joint venture, or any other type of organization or any individual. Excluded from the definition of the term are Federal, State, and tribal governments; a Federally-chartered public corporation that receives a specific Federal appropriation (e.g. Neighborhood Reinvestment Corporation); an insured depository institution or its affiliate; and an officer, director, employee or representative of any of these entities.
C. The Value of the Agreement Exceeds Certain Dollar Thresholds Prescribed by the Statute
The value requirement is satisfied if: (1) the agreement provides for the bank to make cash payments or grants or to give other consideration (except loans) to individuals or entities where the aggregate value of resources provided is more than $10,000 in any calendar year; or (2) the agreement provides for the bank to make loans to individuals or entities where the aggregate value of the loan principal is greater than $50,000 in any calendar year. In either case, the recipients of the payments, resources or loans are not required to be parties to the agreement.
If the terms of the agreement do not specify when funds will be disbursed, the rule provides that the entire amount of the funds is deemed to be disbursed in the first year of the agreement for purposes of determining whether the agreement meets the dollar threshold for coverage. Annual reports are required for any year in which any funds are provided or used pursuant to a covered agreement.
D. The Agreement is “Made Pursuant to, or in Connection with, the Fulfillment of” the CRA
The term “fulfillment” is defined by the statute as a “list of factors that the appropriate Federal banking agency determines has a material impact on the agency’s decision” in connection with an application for a deposit facility or assigning a rating in a CRA evaluation.
Under the rule, “fulfillment” includes providing or refraining from providing, comments or testimony to a federal banking agency about the performance under the CRA of a bank or its CRA affiliate, and providing or refraining from providing, written comments that are required, under the CRA regulations, to be included in the bank’s CRA public file.“Fulfillment” also includes performing any of the activities the agencies consider under the CRA regulations in evaluating a bank’s CRA performance “if the activity is of a type that is likely to be given favorable consideration by a Federal banking agency in evaluating the performance under the CRA” of a bank that is a party to the agreement or its affiliate. An activity is “likely to be given favorable consideration” if, for example: (1) an agency has favorably considered the activity in reviewing the CRA performance of a particular bank; (2) it addresses a deficiency that an agency cited in its most recent public evaluation of the performance of the bank; or (3) it is of the type that has been favorably considered by the agencies in reviewing the CRA performance of comparable banks. E. The Agreement is with an NGEP that has had a “CRA Communication” with the Bank
The statute excludes from coverage agreements between a bank and a party who “has not commented on, testified about, or discussed with the institution, or otherwise contacted the institution” about the CRA. Coverage under the statute is not limited to NGEPs that have filed formal comments or testimony in connection with a bank’s CRA examination or application for a deposit facility. The rule requires that these communications have certain content, as well as satisfy certain timing requirements and occur with individuals who have actual or imputed knowledge of the communication.
1. Content and Timing
The rule defines the following communications by an NGEP as CRA communications:
2. Knowledge
The rule requires that both the bank (or its affiliate) and the NGEP have knowledge of the CRA communication. The bank has knowledge if certain individuals (an employee who approves, directs, authorizes, or negotiates the agreement with the NGEP, or a CRA compliance officer or executive officer who knows that the bank or affiliate is negotiating or intends to negotiate an agreement with the NGEP or knows that the NGEP will seek to negotiate an agreement with the bank or its affiliate) have knowledge of the communication. The bank is deemed to have knowledge under certain circumstances, such as if an NGEP testifies concerning the bank’s CRA record at a public hearing or if the Federal banking agency forwards to any person in the bank, in writing, a comment that the agency has received from an NGEP. Comparable provisions apply to determine when the NGEP has knowledge of the communication.
III. EXCLUDED AGREEMENTS
In addition to the specific exclusion for agreements where there has been no CRA communication between the bank and an NGEP, the rule contains two other exclusions from the disclosure and reporting requirements for agreements that otherwise meet the criteria for coverage. A covered agreement does not include:
IV. DISCLOSURE REQUIREMENTS
The disclosure requirements apply to all covered agreements entered into after November 12, 1999. Each party to a covered agreement must make a copy of the agreement available to any member of the public upon request, although certain confidential or proprietary information may be withheld. The parties to a covered agreement must also make the agreement available to the relevant supervisory agency or agencies. An insured depository institution or affiliate must send a complete copy of a covered agreement or alternatively, a list of covered agreements, to its federal banking agency within 60 days of the end of the calendar quarter in which it enters into the agreement(s). An insured depository institution that elects to provide a list of covered agreements must submit a copy of any agreement on the list within seven calendar days of receiving a request for the agreement from the agency. An NGEP is required to provide a copy of a covered agreement to the appropriate agency only upon the agencies request. The rule sets forth transition provisions for those agreements entered into after November 12, 1999, and that terminate before April 1, 2001, the effective date of the rule.
V. ANNUAL REPORTS
The parties to a covered agreement entered into on or after May 12, 2000, must file an annual report with the relevant supervisory agency or agencies concerning the disbursement, receipt and use of funds or other resources provided under the covered agreement. The report must be filed within six months of the end of the fiscal or calendar year it covers. NGEP’s, insured depository institutions or affiliates with a fiscal year may elect to use the calendar year for annual reporting purposes.
The bank’s (or its affiliate’s) report must include all of the following information:
1. Payments, fees, or loans made or received from, any party to the covered agreement and the terms and conditions of those payments, fees or loans.
2. Aggregate data on loans, investments and services provided by each party in its community pursuant to the covered agreement. A bank is not required to provide information about another party if the bank does not have the information or if the information will be included in the other party’s annual report.
3. Any other information required by the appropriate banking agency’s implementing regulations.
The annual reporting requirements apply to covered agreements entered into on or after May 12, 2000. The rule contains a transition provision for reporting years that end on or before December 31, 2000. If a party to a covered agreement has information to report on a fiscal year that ends between May 12, 2000, and December 31, 2000, it must file an annual report by June 30, 2001.
VI. SUBMITTING AGREEMENTS, LISTS, AND ANNUAL REPORTS TO THE REGULATING AGENCIES
When mailing copies of covered agreements or lists of agreements (pursuant to the disclosure requirements) and annual reports to the relevant supervisory agency, the proper addresses for each supervisory agency is as follows: FDIC
CRA Agreements, PA 1730-7000
Division of Compliance and Consumer Affairs
550 17th Street, NW
Washington, DC 20429
CRA Sunshine
Communications Division
Office of the Comptroller of the Currency
250 E Street, SW
Mail Stop 3-2
Washington, DC 20219
Secretary of the Board
Attn: CRA Sunshine Agreement Annual Reports
Board of Governors of the Federal Reserve System
20th & Constitution Avenue, N.W.
Washington, D.C. 20551
C/O Dissemination Branch
Office of Thrift Supervision
1700 G Street, N.W.
Washington, D.C. 20552