What is the Community Reinvestment Act?

The Community Reinvestment Act (CRA) is a regulatory framework that ensures lending institutions meet the loan and credit needs of the communities they serve, including low-and-moderate-income neighborhoods.

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How Does the Community Reinvestment Act Work?

The Community Reinvestment Act (CRA) was established in 1977 to reduce cases of loan rejections and motivate financial institutions to meet the credit needs of community members, particularly those coming from low and middle-income neighborhoods. The Act expands and clarifies the expectations that banks are supposed to serve the needs and interest of the locals. CRA and other financial regulations require Federal agencies to evaluate the history of every bank and savings institution to ensure the needs of the community are met. CRA also expects banks to consider history when analyzing the applications or approval of mergers and acquisitions and branches banking opening. CRA also offer a clear framework for depository organizations and institutions. Organizations world collaboratively to promote the availability of banking and credit services among under-served communities. Through the framework, savings institutions and banks open new branches and are continuing to provide more services. Some banks have also adopted flexible credit underwriting standards and are committing towards local government and community promotion organizations to increase lending among local communities.

Institutions that operate under CRA

The CRA applies to depository institutions that are insured by the federal government, national banks, commercial banks, and savings banks which have received incorporation articles from a state regulatory body.

Roles of OCC in accordance with CRA

The CRA requires OCC to evaluate the history of a financial institution in regard to the assistance they provide to the local community to meet credit needs including those who are from marginalized neighborhoods. CRA also ensures that these institutions remain consistent with reliable and safe operations, and ensures that every agency considers that history during the evaluation of a request to open branches or relocation of a branch, mergers, and possible acquisitions. Every three years, the OCC is expected to conduct a compliance examination in the national banks through coordination with the CRA. However, Gramm-Leach-Bliley law stipulates that smaller banks can be examined less frequently. Investigations of banks with a CRA overall rating of Outstanding and assets valued at $250 million or less may start after 60 months from the last CRA exam. Similarly, examination of banks with an overall CRA rating of satisfactory and assets valued at $250 million or less can begin only after 48 months elapse after the last exam. Banks can be excluded from this cycle with a reasonable cause or as a result of a request for a deposit facility. The OCC is expected to publish the compliance reviews notice with the CRA; this should be done every quarter. After the examination process ends, an evaluation of the written performance of a banks activities is conducted in compliance with the CRA. The examination findings are made available to the public. The OCC invites the general public including the community, civic organizations, and the government to express their opinions about the performance of a bank in compliance with the CRA. This process allows the bank to address all issues that may arise as well as ensures that the OCC takes into consideration public opinion when evaluating the compliance history of the bank with respect to CRA. If the public comments are sent to the OCC, they would be considered when reviewing any applications contemplated by the CRA.

Benefits of CRA to consumers

Every depository institution has a public file where information that includes written public comments for the last two calendar years are kept. This information which is usually related to a banks performance is usually used to help improve the bank to meet the credit needs of the public. Consumers present their complaints about the financial institution based on the CRA. Depository institutions must place an appropriate public notice at their parent offices public lobby and in each of their branches where the public can obtain information regarding the CRA file, and the institutions are expected to provide copies of the public file whenever there is demand.