Community Reinvestment Act (CRA)
What Is the Community Reinvestment Act?
The Community Reinvestment Act (CRA) is a federal law enacted in 1977 to encourage banks to meet the credit needs of all communities they serve, including low- and moderate-income neighborhoods.
It aims to counteract historical redlining practices.
CRA applies primarily to insured depository institutions.
Why CRA Matters
CRA encourages:
- Fair access to credit
- Investment in underserved communities
- Accountability in lending practices
Banks are periodically evaluated and assigned CRA ratings based on their performance.
Strong CRA performance may affect regulatory approvals for mergers or expansions.
How Community Reinvestment Act Works
- Regulators review lending patterns and community development efforts.
- Banks receive public CRA performance evaluations.
- Institutions are encouraged to serve their entire service area equitably.
CRA does not require banks to make unsafe loans.
CRA vs. ECOA
CRA → Encourages community-level reinvestment
ECOA → Prohibits discrimination in individual credit decisions
They address fairness at different levels.
FAQs About the CRA
Does CRA force banks to approve risky loans?
No, lending must still meet safety and soundness standards.
Who enforces CRA?
Federal banking regulators conduct performance evaluations.
Can the public view CRA ratings?
Yes, CRA performance evaluations are publicly available.
Related Terms
