Community Reinvestment Act


Banks are granted charters to help meet the needs and convenience of the communities where they are located. To further that goal, the Community Reinvestment Act (CRA) requires banks to serve all segments of their community. That is particularly important in areas with low- and moderate-income households. 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. Nonbank financial companies are not currently required by law to be as responsive to community needs and fair lending concerns. The 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. 

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. This would, in turn, help increase the availability of fairly priced financial services in many low-income communities. 



Expanding access to credit for underserved groups

Bank regulators should ensure that all banks fulfill their obligations under the Community Reinvestment Act (CRA). Small banks should not be exempt from the act’s requirements. Each bank should be required to display its current CRA compliance rating prominently on its website. Congress should extend CRA coverage to other industries that offer financial products. 

In evaluating compliance, regulators should consider how an institution, and its subsidiaries or partners, comply with: 

  • state usury laws, which set maximum interest rates that may be charged; 
  • other statutes regulating check cashing and payday lending; and 
  • state basic-banking laws. 

Assessment areas should coincide with the market for an institution’s products. 

CRA assessments should encourage financial institutions to expand access to basic-banking services at reasonable rates for people with low and moderate incomes. 

Financial institutions should receive credit for offering small loans at reasonable rates with realistic repayment periods. 

Standardized data should be developed for the CRA’s service test requirements, particularly given the decline in bank branches in recent years. Banks should be examined to determine whether they effectively market affordable products to consumers with low incomes and assess the services they provide to attract households without bank accounts. 

CRA rules should require that regulators assess the activities of bank affiliates engaged in banking, lending, and investment activities. Incentives for increasing high-quality rates and terms should be incorporated into the performance standards for financial institutions under CRA regulations. 

Policymakers should explore expanding the jurisdiction of the CRA to include financial services offered by nonbanks.