Modernizing Community Reinvestment Act Rules
On May 5, 2022, the federal banking regulators1 announced a Notice of Proposed Rulemaking to modernize the regulations or rules2 that implement the Community Reinvestment Act (CRA). The CRA, enacted in 1977, is one of several key civil rights laws intended to expand access to credit and address discriminatory practices such as redlining.3 Through ongoing supervision and regulation that all US banks are subject to in order to ensure a safe and sound banking system,4 the CRA encourages banks to serve their entire communities, including low- and moderate-income communities, consistent with safe and sound practices. The CRA was designed to address inequities in access to credit for low- and moderate-income individuals and communities, but the regulations were last updated in 2005 before online banking, smartphones, and social media platforms transformed the way that consumers bank.
To help address both the realities of banking in the 21st century and meet the credit needs of low- and moderate-income communities, the bank regulating agencies issued a shared statement on July 20, 2021, in which they agreed to work toward jointly modernizing the CRA framework consistently across all regulators. The proposed updates to the CRA regulations, described in the May notice, were designed with the intent to better achieve the statute's core purpose and adapt the regulation to a changing banking landscape.
Previous agency proposals, feedback from stakeholders, and research were important inputs into the notice of proposed rulemaking. The notice discusses eight key objectives of the agencies as they seek to update to the CRA regulations. They include the following:
- Strengthen the achievement of the core purpose of the statute
- Adapt to changes in the banking industry, including mobile and online banking
- Provide greater clarity and consistency in the application of the regulations
- Tailor performance standards to account for differences in bank size, business model, and local conditions
- Tailor data collection and reporting requirements and use existing data whenever possible
- Promote transparency and public engagement
- Ensure that CRA and fair lending responsibilities are mutually reinforcing
- Create a consistent regulatory approach among all three banking agencies.
In the following podcast, Fed Board of Governors Vice Chair Lael Brainard and Atlanta Fed president Raphael Bostic discuss why the CRA and the CRA modernization process are so important for enabling access to credit across the United States. They also note why it is so very important to hear from all stakeholders to ensure that the banking regulators get CRA reform right.
We encourage you to take time to listen to the podcast and to provide feedback on the notice through the public comment process. Visit Federal Reserve Board Community Reinvestment Act Proposed Rulemaking to submit public comments before the deadline, Friday, August 5, 2022. Since the May notice is over 700 pages long, use the "CTRL + F" function to search for key terms that you believe are especially important for our southeastern region.
For example, given the geography and socio-demographics of the states within the Atlanta Fed's boundaries,5 topics of interest to some Sixth District community partners could include rural areas, climate and natural disaster resilience, affordable housing, or persistent poverty to achieve the CRA's objectives.
We look forward to hearing from different stakeholders throughout the Sixth District on how the notice can ensure the CRA regulations reflect the modern banking landscape.
By Charly van Dijk, CED senior adviser, and Mary Hirt, CED research analyst II. The views expressed here are the authors' and not necessarily those of the Federal Reserve Bank of Atlanta or the Federal Reserve System. Any remaining errors are the authors' responsibility.
1 The regulators are the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Federal Reserve.
2 "Regulations" are the rules or key guidance that federal agencies use to help implement congressional legislation also known as statutes, in this case the Community Reinvestment Act.
3 See The Community Reinvestment Act's History and Future (stlouisfed.org).
4 To learn more about how banks are regulated and supervised, view The Fed Explains Bank Supervision and Regulation.
5 The Atlanta Fed territory includes Alabama, Florida, Georgia, and parts of Louisiana, Mississippi, and Tennessee.