What is the Community Reinvestment Act?

The Community Reinvestment Act (CRA) is an important tool to build wealth, revitalize neighborhoods, and ensure that the credit needs of all communities are being met. Passed in 1977, CRA was a response to “redlining” practices in which banks refused to issue credit to minority neighborhoods.

CRA requires banks to meet the credit needs of all communities in their assessment area, including low and moderate income (LMI) areas, consistent with safety and soundness. Since its passage, the Act has leveraged $6 trillion for low and moderate income communities, and helped to spur affordable housing and small business development.

Federal regulators examine banks’ lending practices, giving banks credit for their community development lending; grants to community organizations in low and moderate income areas; loan products geared towards small businesses and LMI borrowers; placement of branches and services in LMI neighborhoods; and investments in LMI communities. Banks can be downgraded for fair lending complaints.

Community organizations have an opportunity to comment on a bank’s performance, and can influence the rating the bank receives. When banks submit applications for mergers or acquisitions, federal regulators are required to take public input into account before approving the bank’s application.