The original Act was passed by the
95th United States Congress and signed into law by President
Jimmy Carter on October 12, 1977 (, ). The CRA was passed as a result of national pressure to address the deteriorating conditions of American cities—particularly lower-income and minority neighborhoods. Several legislative and regulatory revisions have since been enacted.
Original act The CRA followed similar laws passed to reduce discrimination in the credit and housing markets including the
Fair Housing Act of 1968, the
Equal Credit Opportunity Act of 1974 and the
Home Mortgage Disclosure Act of 1975 (HMDA). The Fair Housing Act and the Equal Credit Opportunity Act prohibit discrimination on the basis of race, sex, or other personal characteristics. The Home Mortgage Disclosure Act requires that financial institutions publicly disclose mortgage lending and application data. In contrast with those acts, the CRA seeks to ensure the provision of credit to all parts of a community, regardless of the relative wealth or poverty of a neighborhood. Before the Act was passed, there were severe shortages of credit available to low- and moderate-income neighborhoods. In their 1961 report, the
U.S. Commission on Civil Rights found that African-American borrowers were often required to make higher
downpayments and adopt faster repayment schedules. The commission also documented blanket refusals to lend in particular areas (
redlining). The allegations of "redlining" certain neighborhoods originated with the
Federal Housing Administration in the 1930s. The "residential security maps" created by the
Home Owners' Loan Corporation (HOLC) for the FHA were used by private and public entities for years afterwards to withhold mortgage capital from neighborhoods that were deemed "unsafe". Contributory factors in the shortage of direct lending in low- and moderate-income communities were a limited secondary market for mortgages, informational problems to do with the lack of credit evaluations for lower-income borrowers, and lack of coordination among credit agencies.
Legislative revision history The hidden table below lists the
acts of Congress that affected the Community Reinvestment Act directly. The years in which the legislative revisions were made appear in bold text preceding the Public Laws that enacted them. The links to the
codification and
section notes may provide additional information about the legislative changes as well.
Legislative changes 1989 The
Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) was enacted by the 101st Congress and signed into law by President
George H. W. Bush in the wake of the
savings and loan crisis of the 1980s. As part of the subsequent general reform of the banking industry, FIRREA added section 807 (12. U.S.C. § 2906) to the existing CRA statutes in an effort to improve the area concerning insured depository institution examinations. The new language now required the appropriate Federal regulatory agency to prepare a written evaluation after completing the examination of an institution's record in meeting the credit needs of its entire community, including any low- and moderate-income neighborhoods within it. These evaluation reports were divided into separate sections - one confidential; allowing the evaluated institution to retain its proprietary and personal information integrity at the same time the beginnings of the related databases were being compiled, and the other made public; intended to increase access and oversight of the CRS examination process. The public section introduced a four-tiered CRA examination rating system with performance levels of 'Outstanding', 'Satisfactory', 'Needs to Improve', or 'Substantial Noncompliance', each supplemented with a written synopsis of the agencies' evaluation reasoning using any available facts to support their conclusions. According to
Ben Bernanke, this law greatly increased the ability of advocacy groups, researchers, and other analysts to "perform more-sophisticated, quantitative analyses of banks' records", thereby influencing the lending policies of banks. Over time, community groups and nonprofit organizations established "more-formalized and more-productive partnerships with banks." A week earlier that same December, the existing CRA statute was amended once again upon the enactment of the
Resolution Trust Corporation Refinancing, Restructuring, and Improvement Act of 1991. It allowed the
Resolution Trust Corporation (RTC) to make available any branch of any savings association located in any predominantly minority neighborhoods that the RTC had been appointed the conservator or receiver of any minority depository institution or women's depository institution with favorable conditions. Upon the addition of section 808 (12. U.S.C. § 2907) to the existing CRA statutes by the Act, any depository institution which donated, sold with favorable terms (as determined by the appropriate Federal financial supervisory agency), or made available on a rent-free basis any branch of such institutions located in any predominantly minority neighborhood to any minority depository institution or women's depository institution, the amount of the contribution or the amount of the loss incurred in connection with such activity would go towards meeting the credit needs of the institution's community and would be taken into consideration when CRA examinations were evaluated.
Legislative changes 1992 Although minor amendments were made directly to the Community Reinvestment Act concerning the
consideration of minority and female owned institutions & partnerships during evaluations first established in 1991, other portions of the
Federal Housing Enterprises Financial Safety and Soundness Act of 1992 indirectly affected the CRA practices at the time in requiring
Fannie Mae and
Freddie Mac, the two
government sponsored enterprises that purchase and securitize mortgages, to devote a percentage of their lending to support affordable housing. According to Bernanke, a surge in bank merger and acquisition activities followed the passing of the act, and advocacy groups increasingly used the public comment process to protest bank applications on
Community Reinvestment Act grounds. When applications were highly contested, federal agencies held public hearings to allow public comment on the bank's lending record. In response many institutions established separate business units and subsidiary corporations to facilitate CRA-related lending. Local and regional public-private partnerships and multi-bank loan consortia were formed to expand and manage such CRA-related lending.
Robert Rubin, the Assistant to the President for Economic Policy, under President Clinton, explained that this was in line with President Clinton's strategy to "deal with the problems of the inner city and distressed rural communities". Discussing the reasons for the Clinton administration's proposal to strengthen the CRA and further reduce red-lining,
Lloyd Bentsen, Secretary of the Treasury at that time, affirmed his belief that availability of credit should not depend on where a person lives, "The only thing that ought to matter on a loan application is whether or not you can pay it back, not where you live." Bentsen said that the proposed changes would "make it easier for lenders to show how they're complying with the Community Reinvestment Act", and "cut back a lot of the paperwork and the cost on small business loans". The CRA examination process itself was reformed to incorporate the pending changes. During one of the Congressional hearings addressing the proposed changes in 1995,
William A. Niskanen, chair of the
Cato Institute, criticized both the 1993 and 1994 sets of proposals for political favoritism in allocating credit, for micromanagement by regulators and for the lack of assurances that banks would not be expected to operate at a loss to achieve CRA compliance. He predicted the proposed changes would be very costly to the economy and the banking system in general. Niskanen believed that the primary long-term effect would be an artificial contraction of the banking system. Niskanen recommended Congress repeal the
Act. Niskanen's, and other respondents to the proposed changes, voiced their concerns during the public comment & testimony periods in late 1993 through early 1995. In response to the aggregate concerns recorded by then, the Federal financial supervisory agencies (the OCC, FRB, FDIC, and OTS) made further clarifications relating to definition, assessment, ratings and scope; sufficiently resolving many of the issues raised in the process. The agencies jointly reported their final amended regulations for implementing the
Community Reinvestment Act in the
Federal Register on May 4, 1995. The final amended regulations replaced the existing CRA regulations in their entirety. (See the notes in the "1995" column of
Table I. for the specifics)
Legislative changes 1999 In 1999 the Congress enacted and President Clinton signed into law the
Gramm-Leach-Bliley Act, also known as the
Financial Services Modernization Act. This law repealed the part of the
Glass–Steagall Act that had prohibited a bank from offering a full range of
investment,
commercial banking, and
insurance services since its enactment in 1933. A similar bill was introduced in 1998 by
Senator Phil Gramm but it was unable to complete the legislative process into law. Resistance to enacting the 1998 bill, as well as the subsequent 1999 bill, centered around the legislation's language which would expand the types of banking institutions of the time into other areas of service but would not be subject to CRA compliance in order to do so. The Senator also demanded full disclosure of any financial "deals" which community groups had with banks, accusing such groups of "extortion". In the fall of 1999, Senators
Dodd and
Schumer prevented another
impasse by securing a compromise between Sen. Gramm and the Clinton Administration by agreeing to amend the
Federal Deposit Insurance Act () to allow banks to merge or expand into other types of financial institutions. The FDIC related provisions of the new
Gramm-Leach-Bliley Act, along with the addition of sub-section § 2903(c) directly to Title 12, insured any bank holding institution wishing to be re-designated as a financial holding institution by the
Board of Governors of the
Federal Reserve System would also have to follow
Community Reinvestment Act compliance guidelines before any merger or expansion could take effect. At the same time the ''G-L-B Act's
changes to the Federal Deposit Insurance Act'' would now allow for bank expansions into new lines of business, non-affiliated groups entering into agreements with these bank or financial institutions would also have to be reported as outlined under the newly added section to Title 12, § 1831y (CRA Sunshine Requirements), to satisfy Gramm's concerns. In conjunction with the Gramm-Leach-Bliley Act changes, smaller banks would be reviewed less frequently for CRA compliance by the addition of §2908. (Small Bank Regulatory Relief) directly to , (the existing CRA laws), itself. The 1999 Act also mandated two studies to be conducted in connection with the "
Community Reinvestment Act": :* the first report by the Federal Reserve, to be delivered to Congress by March 15, 2000, is a comprehensive study of CRA to focus on default and delinquency rates, and the profitability of loans made in connection with CRA; :* the second report to be conducted by the Treasury Department over the next two years, is intended to determine the impact of the Act on the provision of services to low- and moderate-income neighborhoods and people, as intended by CRA. On signing the Gramm-Leach-Bliley Act, President Clinton said that it, "establishes the principles that, as we expand the powers of banks, we will expand the reach of the [Community Reinvestment] Act".
Regulatory changes 2005 In 2002 there was an inter-agency review of the effectiveness of the 1995 regulatory changes to the Community Reinvestment Act and new proposals were considered. In early 2005, the
Office of Thrift Supervision (OTS) implemented new rules that – among other changes – allowed thrifts with over $1 billion in assets to tweak the long-standing 50-25-25 CRA ratings thresholds by continuing to meet 50 percent of their overall CRA rating through lending activity as always but the other 50 percent could be any combination of lending, investment, and services that the thrift wanted. The obligations to adhere to 25 percent for services and 25 percent for investments became optional and the means to securing a satisfactory CRA rating was left to the discretion of the qualifying thrifts instead (See the notes in the "2005" column of
Table I. for the specifics). In April 2005, a contingent of Democratic
Congressmen led by Representative
Barney Frank issued a letter protesting these changes, saying they undercut the ability of the CRA to "meet the needs of low and moderate-income persons and communities". The changes were also opposed by community groups concerned that it would weaken the CRA. After enacting a technical regulatory amendment in the interim incorporating a different formula for stratifying both metropolitan and rural zones to better align with an expanded definition of them under the CRA in the process, the Federal Deposit Insurance Corporation (FDIC), the Board of Governors of the Federal Reserve System (FRB), and the Office of the Comptroller of the Currency (OCC) also put a new set of regulations into effect in September 2005 - mirroring much of what the OTS had already initiated earlier in the year (See the notes in the "2005" column of
Table I for specifics). These regulations also included less restrictive definitions of "small" and "intermediate small" banks. OTS Director at the time, John Reich announced the final decision to go ahead and implement the proposed revisions in four main areas of its existing
Community Reinvestment Act (CRA) regulations to reestablish uniformity between its rules and those of the other federal banking agencies. Reaffirming the basis for the revised rules as first proposed, Reich stated, "OTS is making these revisions to promote consistency and facilitate objective evaluations of CRA performance across the banking and thrift industries. Consistent standards will allow the public to make more effective comparisons of bank and thrift CRA performance." He noted the changes reinforce CRA objectives consistent with thrifts' performance in meeting the financial services needs of their communities. This OTS rule revision aligned with that of the other agencies by: • eliminating the option of alternative weights for lending, investment, and service under the large, retail savings association test; • defining institutions with assets between $250 million and $1 billion as "intermediate small savings associations" subject to a new community development test; • indexing the asset threshold for "small" and "intermediate small" savings associations annually based on changes to the Consumer Price Index (CPI); and • clarifying the adverse impact on a savings association's CRA rating where the OTS finds evidence of discrimination or other illegal credit practices. These four changes generally mirror the ones made by the other three federal agencies in late
2005. The agency noted that latitude would be provided for a short period of time to institutions in the context of examinations conducted after the effective date, July 1, 2007, in order to implement program changes under the new rule smoothly.
Legislative changes 2008 With the passage of the
Higher Education Opportunity Act into law, , on August 14, 2008, each appropriate Federal financial supervisory agency shall now consider, as a factor in assessing and taking into account the record of a financial institution's CRA compliance, any & all low-cost education loans provided by the financial institution to low-income borrowers. All the affected Federal financial supervisory agencies have one year after the date of enactment to issue rules in final form to implement the change into the
Code of Federal Regulations (CFR) according to Title X, Subtitle C, Section 1031 of the Act.
CRA reform proposals In 2007,
Ben Bernanke suggested further increasing the presence of Fannie Mae and Freddie Mac in the affordable housing market to help banks fulfill their CRA obligations by providing them with more opportunities to securitize CRA-related loans. On February 13, 2008, the
United States House Committee on Financial Services held a hearing on the Community Reinvestment Act's impact on the provision of loans, investments and services to under-served communities and its effectiveness. There were 15 witnesses from government and the private sector. Congresswoman
Eddie Bernice Johnson introduced new legislation, the , on March 12, 2009, to expand the scope of CRA to include
non-bank financial institutions, such as
credit unions. There were other attempts to legislatively "modernize" the Community Reinvestment Act in previous sessions of Congress, such as in
/ and , among others. The
United States House Committee on Financial Services held hearings on September 16, 2009 on "Proposals to Modernize the Community Reinvestment Act" with 10 witnesses, including Johnson. Another hearing was held on April 15, 2010 on "Perspectives and Proposals on the Community Reinvestment Act" with eight witnesses. On June 24, 2010, the
Office of the Comptroller of the Currency (OCC),
Federal Reserve System,
Federal Deposit Insurance Corporation (FDIC), and the
Office of Thrift Supervision (OTS) jointly published proposed revisions to the rules implementing the Community Reinvestment Act. These agencies, with the
National Credit Union Administration (NCUA), make up the
Federal Financial Institutions Examination Council (FFIEC), which coordinates regulation of financial institutions, including implementation of the Community Reinvestment Act. The proposed revisions to CRA rules are intended to revise the term "community development" to "include loans, investments and services that support, enable or facilitate projects or activities" that meet the criteria described in the
Housing and Economic Recovery Act of 2008 (HERA) and are conducted in designated target areas identified under the Neighborhood Stabilization Program established by HERA and the
American Recovery and Reinvestment Act of 2009 (ARRA). Among other things, this would expand the range of persons served to include middle-income households. In 2009, The Federal Reserve Banks of Boston and San Francisco published
Revisiting the CRA: Perspectives on the Future of the Community Reinvestment Act, which assembles views from a wide range of academic researchers, regulators, community development practitioners and financial service industry representatives on how to improve the CRA going forward. The Obama administration has increased scrutiny of the provision of credit to poor and African American neighborhoods. Lenders have come under investigation for not operating in such areas, whether they have halted service there or have never operated in them before. Former
Atlantic associate editor Daniel Indiviglio attributes increasing noncompliance with the CRA to the tightening of lending requirements. In 2020, the OCC proposed a final rule for CRA that was billed as an attempt to modernize the act to keep with changes in the financial sector, particularly the growth of digital banking. It did this unilaterally without support from the FDIC and the Federal Reserve. Community groups were also opposed to the 2020 proposal. Led by the National Community Reinvestment Coalition (NCRC), 1,594 or 83% of the 1,922 unique comments submitted disagreed with the OCC’s rule; 674 of those comments cited NCRC or used some of the organization’s suggested language. An additional 10,000 comments from individuals, submitted through an online petition campaign, also supported NCRC’s point of view. Despite this opposition, the OCC published the final rule in 2020. Immediately after, NCRC and the California Reinvestment Coalition (CRC), represented by Democracy Forward and Farella Braun + Martel, filed a lawsuit seeking to vacate the OCC’s CRA rule, claiming that it violated the Administrative Procedure Act and was finalized without sufficient data to support the revisions. In February 2020, a federal judge rejected the OCC’s attempt to dismiss the lawsuit, a key hurdle in moving the claim forward. In January 2021, with the inauguration of President Joe Biden, the OCC went under new leadership, and on December 14, 2021, the OCC fully rescinded its 2020 CRA rule. Community groups submitted a position paper on March 1, 2022, to the OCC, FDIC and Federal Reserve about the key reforms they wanted to see. These included a consideration of race on CRA exams, more objective measures of performance that reduce ratings inflation, and expanded CRA assessment areas that include not only where banks have branches but also areas with significant amounts of bank lending and/or deposit activity. The groups also recommended that CRA be expanded to apply throughout the financial sector, beyond banks. This would require Congressional legislation, but there were precedents in state CRA laws that apply to mortgage companies and credit unions, not just banks. New regulations with the support of consumer advocates were proposed in October 2023, that would count online loans to target demographics regardless of geographic location. These were the subject of a lawsuit by the American Bankers Association. ==Criticisms==