Overhauling the CRA to Address Financial Inclusion

In 1977, Jimmy Carter was sworn in as the 39th president of the United States, the original Star Wars movie was released in theatres, the Concorde flew its first commercial flight, and the Community Reinvestment Act (CRA) was enacted as a historic law to encourage U.S. banks to help meet the credit needs of their local communities, including low- and moderate-income (LMI) neighborhoods.

A Time to Modernize the CRA

Forty-five years later, the Board of Governors of the Federal Reserve System (Federal Reserve Board), Federal Deposit Insurance Corporation (FDIC), and Office of the Comptroller of the Currency (OCC) say it’s time to modernize the CRA. The last substantive updates to the CRA regulations were in 1995 and 2005. That’s why these federal bank regulatory agencies jointly issued a proposal to strengthen regulations implementing the Community Reinvestment Act to better achieve the law’s purpose.

“The CRA is a historic law, enacted along with other complementary federal civil rights laws during the late 1960s and 1970s,” said Vice-Chair of the Federal Reserve Board Lael Brainard. “The intent of these laws was to address redlining—the process of drawing a red line around entire communities that limited their access to credit—as well as other systemic inequities in access to credit, investment, and banking services faced by LMI and minority communities.”

“As we saw during the pandemic, financial inclusion is more important than ever,” Brainard continued. “Going into the pandemic, Black families had one-fifth the wealth buffer to fall back on relative to the average American family, and Latino families had less than one-third the average. The pandemic demonstrated clearly the importance of access to financial services for low- and moderate-income households.”

Elements of the Proposal

So, after extensive feedback from stakeholders and in-depth research on issues affecting LMI communities, the agencies propose some of the following measures to strengthen the CRA:

  • Expand access to credit, investment, and basic banking services in low- and moderate-income communities. The proposal would promote community engagement and financial inclusion. It would also emphasize loans and investments that serve the smallest businesses or farms.
  • Adapt to changes in the banking industry, including internet and mobile banking. The proposal would update CRA assessment areas to capture activities of banks where they do business outside of branch networks.
  • Promote clarity and transparency. The proposal would adopt a metrics-based approach to CRA evaluations. It also would clarify eligible CRA activities, such as activities that promote affordable homeownership for LMI individuals, and provide a special focus on underserved and rural communities.
  • Tailor evaluations and data collection to bank size and type. The proposal recognizes differences in bank size and business models. It provides that smaller banks would continue to be evaluated under the existing CRA regulatory framework with the option to be assessed under aspects of the new proposed framework.
  • Maintain a unified approach. The proposal reflects a unified approach from the bank regulatory agencies and incorporates extensive feedback from stakeholders.

Getting Your Input

Now it’s your turn to weigh in on the proposed changes to the regulations that implement the CRA and our goal of reaching underserved communities. The agencies invite public feedback on all aspects of the Notice of Proposed Rulemaking (NPR) through August 5, 2022.

Submit your comment to the Federal Reserve Board. All comments received become part of the public record and are posted on the Federal Reserve Board’s website. Additional options for submitting comments to the Federal Reserve Board, the OCC, and FDIC are available on pages 2-5 of the NPR, including more details on viewing comments.

Want to learn more about the CRA NPR?

Elizabeth Lawson-Kurdy is the communications lead for Supervision + Credit on the Communications + Experience team at the Federal Reserve Bank of San Francisco.

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The views expressed here do not necessarily reflect the views of the management of the Federal Reserve Bank of San Francisco or of the Board of Governors of the Federal Reserve System.