In a setback for Bank of America, a federal regulator has lowered its rating for community lending and investing.
The Office of the Comptroller of the Currency gave the Charlotte bank a “satisfactory” grade, the second-highest of four ratings, for the period from April 2009 to the end of December 2011.
The regulator released the rating last week in its latest evaluation of the bank’s compliance with the Community Reinvestment Act. The 1977 law encourages banks to meet the credit needs of the communities in which they operate, including low- and moderate-income neighborhoods.
The new rating breaks a streak in which Bank of America received the highest grade, “outstanding,” for seven evaluations in a row.
In the report, the OCC cited evidence of discriminatory or other illegal credit practices that hurt Bank of America’s rating. The three examples the regulator pointed to:
— An April settlement with the OCC to resolve the regulator’s claims that the bank billed customers full price for identity-protection products even though customers were not receiving all of the product’s services.
— A 2012 settlement with the U.S. Department of Justice to resolve claims the bank discriminated against mortgage-loan borrowers on the basis of disability and receipt of public assistance.
— A 2011 settlement with the Justice Department after the department accused the bank of foreclosing on members of the military in violation of a federal law.
In a statement, Bank of America’s head of corporate social responsibility, Andrew Plepler, said the bank “has always been and continues to be committed to meeting the needs of low and moderate-income communities and customers.”
The bank “worked hard” to receive an outstanding rating, he said.
“However, given the particularly challenging review period following our legacy issues associated with the acquisition of Countrywide in 2008, among other things, the OCC downgraded our rating.”
Ken Thomas, a Miami-based banking consultant and CRA expert, said Bank of America is now one of only three top-10 banks with a satisfactory rating.
“Just when you thought they were making some progress, they have another reputational issue,” Thomas said. “We expect outstanding ratings for all of our banks.”
JPMorgan Chase and Bank of New York Mellon are the other two banks that have been downgraded, he said.
Receiving a satisfactory rating is a blow to a bank’s reputation but doesn’t carry any penalties, Thomas said. If a bank falls below satisfactory, however, regulators can hold up mergers and new branch openings, he said.
The OCC report was not all negative for Bank of America. The regulator said the bank’s lending performance was good throughout the U.S., based on geographic and borrower income reach. Among other things, the report said the bank’s investment activity showed “excellent responsiveness” to credit needs.
Thomas took issue with the length of time it has taken for the OCC to announce Bank of America’s most recent exam results. The delay gives the bank time to improve its next ranking and downplay the fact that it received a satisfactory, he said.
“There is no excuse for that,” he said.