Community Reinvestment Act

What’s the Issue?

Banks care about the vibrancy and vitality of their communities, and they support the goals of the Community Reinvestment Act (CRA). Designed to be broad, flexible, and responsive to changes within communities, the law established guidelines to ensure banks serve the needs of their local communities. Unfortunately, the objectives of the CRA statute are being undermined by outdated implementing regulations.

CRA was established more than 40 years ago, and current regulations do not reflect significant changes that have occurred in the banking sector – especially the advances in technology with mobile and online banking that have enhanced how banks serve communities.

What’s the latest with CRA?

In 2020, banking regulators began looking at an update to CRA regulations to reflect how banking has evolved. In October 2024, the OCC, FDIC, and Federal Reserve adopted a final rule modernizing CRA regulations. While updating CRA regulations is necessary, the final rule as issued by the banking agencies failed to accurately reflect the world of banking today. The banking agencies also did not provide sufficient analysis to support the new regulations. The new rule as written may end up reducing access to small business loans, mortgages, and community development financing.

Some of the concerns with the new rule include:

  • It expands the definition of what constitutes a “community” where regulators will evaluate CRA performance, including assessing banks outside of their current branch network.
  • Performance will be evaluated on a complex series of benchmarks, thresholds, and ratings methodologies, which may be especially confusing for banks to follow without tools from regulators to help banks understand how data points will be measured.

What can be done to achieve the goals of CRA and make it simpler for banks to implement?

The banking agencies should provide banks with free tools to better understand and calculate how they will be evaluated on compliance with CRA. Importantly, these tools must be shared with banks sufficiently in advance of the new rule taking effect. Learn more in-depth about CRA here.