Guidance on Community Reinvestment Act Improved After Comments

The federal banking agencies’ final guidance to implement the recent changes in the Community Reinvestment Act (CRA) regulations incorporated suggestions from community groups and CRA advocates.

The CRA requires banks and savings and loans to offer credit and financial services throughout their market areas and prohibits them from targeting, or “redlining,” their services to wealthy neighborhoods only. The final CRA rules, in effect since September 2005, create new tests for midsize banks and establish new procedures for determining CRA points for community development financing in distressed and underserved rural areas and in areas recovering from natural disasters.

Two hundred comment letters pressed the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of Comptroller of the Currency to revise some of the questions and answers to reflect better the banking and financing needs of low- and moderate-income communities. The final guidance emphasizes access to low-cost banking services in those communities, reasonably priced remittances connected to low-cost accounts, and community development financing most responsive to community needs, including the needs of individuals from those communities. The Sargent Shriver National Center on Poverty Law and other Illinois advocates urged the regulators to make the establishment of bank branches a key factor in evaluating new midsize banks’ compliance with the CRA.
The guidance will be effective upon publication, expected shortly, in the Federal Register. See the final Q&A’s at www.fdic.gov, www.occ.treas.gov, www.ots.treas.gov, or www.federalreserve.gov. For additional information, contact Ian Gardiner or Dory Rand of the Shriver Center.