Community Reinvestment Act

Banks are granted charters to help meet the needs and convenience of the communities where they are located, including low- and moderate-income neighborhoods. To that goal, the Community Reinvestment Act (CRA) requires banks to serve all segments of their community. However, the CRA does not cover all types of financial institutions or products and has some major gaps.

More and more financial products and services are offered by nonbank providers, especially online, in ways not anticipated by the act. CRA relies on banks’ geographic footprint to measure whether all segments of the community are being served adequately and affordably. As a result, researchers and policymakers lack sufficient data about the services offered by nonbanks. Nonbank financial companies are not currently required by law to be as responsive to community needs and fair lending concerns.

Banks’ evaluations under the CRA are often inconsistent and lack strong performance-driven measurements. Improved data collection and greater involvement of community-based organizations in the development of performance measures would help make CRA evaluations more effective and could help increase the availability of fairly priced financial services in many low-income communities.