The Community Reinvestment Act
The Community Reinvestment Act (CRA)
The Community Reinvestment Act (CRA), enacted in 1977, requires federal banking regulators to encourage insured depository institutions to help meet the credit needs of their entire community, specifically low- and moderate-income (LMI) neighborhoods. It mandates periodic evaluations of how banks meet these needs, with ratings affecting approvals for mergers, acquisitions, and new branches. [1, 2, 3, 4]
Key Requirements of the CRA
- Meet Community Credit Needs: Banks must help meet credit needs—including affordable housing, small business loans, and community development loans—in the areas where they operate.
- Periodic Evaluations: The Federal Reserve, FDIC, and OCC evaluate banks’ performance and assign ratings (e.g., “Outstanding,” “Satisfactory”).
- Evaluation in Applications: Regulators take a bank’s CRA performance record into account when reviewing applications for deposit facilities, such as mergers, acquisitions, or opening new branches.
- Public File Maintenance: Banks must maintain a public file that includes their most recent CRA performance evaluation, a list of branches, and public comments.
- Public Notice: Institutions must display a public notice in their lobbies informing customers of the availability of this information. [1, 2, 3, 4, 5, 6]
Core Focus Areas
The Act specifically highlights the need for investment in low- and moderate-income (LMI) neighborhoods to combat historically unequal access to credit. Activities that get CRA credit include: [1, 2]
- Affordable Housing: Financing for rental housing or home purchases for LMI individuals.
- Economic Development: Loans to small businesses and small farms.
- Community Development Services: Technical assistance to nonprofits or financial education for LMI residents. [1, 2]
The CRA applies specifically to insured depository institutions, not all financial institutions, and operates consistently with safe and sound banking practices. [1, 2]