Dear John,

The ongoing debate about updating the Community Reinvestment Act (CRA) guidelines is more than a series of bureaucratic conversations about regulatory bank reform, and housing advocates should understand what’s at stake.

The Community Reinvestment Act (CRA) was adopted in 1977 to encourage financial institutions to help meet the credit needs of the communities in which they do business. Focusing intentionally on low- and moderate-income neighborhoods and communities of color, the law was intended to reverse the harmful effects of decades of systemic racial and economic discrimination in lending and community investment practices. As Federal Reserve Governor Lael Brainard summarized during a recent appearance at the Urban Institute:

“The CRA was one of several landmark civil rights laws to address systemic inequities in credit access. The CRA was intended to reinforce the other statutes in addressing redlining, wherein banks declined to make loans or extend other financial services in neighborhoods of largely Black and other minority households, in part based on government maps that literally delimited these neighborhoods in red as high credit risks. By enacting the CRA, lawmakers aimed to reverse the disinvestment associated with years of government policies and market actions that deprived lower-income and predominantly minority areas of credit and investment.”

Three federal regulatory agencies – the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve (FR) – have oversight for CRA compliance. Each regulator has a dedicated CRA site that provides information about the banks they oversee and their CRA ratings and Performance Evaluations.

And therein lies the rub.

Banking and financial institutions have evolved since the ‘70s, and the regulations that govern the CRA are currently under review. Recently, the OCC has moved forward with a series of recommendations that community development advocates fear will weaken the intent of the CRA to invest in low-income communities. Notably, the other two regulatory agencies declined to sign on to these recommendations; one stating that a pandemic is not the time to introduce new regulatory guidance, and the other announcing an extended comment period in the hope that the three agencies would “come together on a consistent approach.” The inability to come to an agreement has caused concern that the result will be different standards for financial institutions depending on their charter.

It is unclear if consensus will be found, or when that might happen. The one point not in dispute is that an update is needed, but advocates must be vigilant in maintaining the original intent of this landmark civil rights law, as Governor Brainard stated. The Community Reinvestment Act reminds us how racist practices are embedded into the procedures and policies of essential institutions. As such, it stands as a xxxxxx against redlining, and must be protected.

Michelle Krocker

Executive Director

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