The Community Reinvestment Act

Background and Summary

The Community Reinvestment Act (CRA) of 1977 encourages each insured financial institution covered by the Act to help meet the credit needs of the entire communities in which it operates, including low-and moderate-income neighborhoods consistent with safe and sound operations.

CRA requires that each federal financial supervisory agency assess the lending, investment and service records of each covered financial institution in helping to meet the credit needs of its entire community, including low- and moderate-income neighborhoods consistent with safe and sound operations, and take that record into account when deciding whether to approve an application by the institution for a deposit facility, merger or acquisition.

Each of the four supervisory agencies, the Board of Governors of the Federal Reserve System, the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), and the Office of Thrift Supervision (OTS) is required to:

• Use its examination authority to encourage an institution to help meet the credit needs of its entire community, consistent with safe and sound operation of its institution;
• Assess, in connection with its examination, an institution’s record of helping to meet the credit needs of its entire community; and
• Take that record into account in evaluating an application for a charter, deposit insurance, branch or other deposit facility, office relocation, merger, or holding company acquisition of a regulated financial institution.

The CRA Statement

The CRA regulations of each Supervisory Agency require the board of directors of each institution to adopt, and at least annually review, a CRA Statement. The institution must provide a copy of its current CRA Statement to members of the public upon request. The institution may charge a fee, not to exceed actual cost, for reproduction and mailing, if applicable. The Statement must include:

1. Delineation (or description), on a map, of each local community served by the institution. (Each institution must identify the local community or communities that it serves.)
2. A list of specific types of credit that the institution is prepared to extend within each local community.
3. A copy of the CRA notice.

An institution must provide in each office a CRA Notice, the exact wording of which is prescribed in the regulation. This includes:

• The availability of the CRA Statement;
• That written comments on the Statement and institution’s community lending performance may be submitted to the institution or its supervisory agency;
• That a file of such comments is publicly available;
• That the public may request announcements of the institution’s applications covered by CRA from the supervisory agency; and
• The availability of the CRA Performance Evaluation.

Review and Retention of Records

Each institution’s board of directors must review each CRA Statement at least annually and must amend the Statement at its first regular meeting after a change in any of the information presented in the Statement occurs. Such changes may be, but are not limited to, a revision in the institution’s community delineation, or the introduction of a new credit product.

Assessment Area Considerations

Institutions are required to identify one or more assessment areas within which the regulatory agencies will evaluate the institution’s performance. In most cases, an institution’s assessment area will be the geographical location of a town; municipality, county, some other political subdivision or the Metropolitan Statistical Areas (MSA) in which its branches are located and a substantial portion of its loans are made.

Performance Context

An institution’s performance under the regulatory assessment criteria is evaluated in the context of information about the institution, its community, and its competitors.

The federal bank examiner will review demographic and economic data about the institution’s assessment area(s), the information about local economic conditions, the institution’s major business products and strategies, and its financial condition, capacity, and ability to lend or invest in its community.

The three examinations are as follows:

• The Lending Test, which focuses on lending activity, geographic distribution, borrower characteristics, community development lending and innovative or flexible lending practices.
• The Investment Test, which considers qualified investments, defined as investments whose primary purpose is community development.
• The Service Test covers four criteria: Distribution of Bank Branches, Record of Opening and Closing Branches, Alternative Service Delivery Systems, and Range of Services

The Role of Community Contacts

Interviews with local community, civic, or government leaders can help bank examiners learn about the community, its economic base, and local community development initiatives. They can also help examiners understand public perceptions of how well local financial institutions are responding to their credit needs.

These interviews help provide balance to the examiner’s understanding of the performance context. Community contact interviews normally take the form of personal meetings, but telephone conversations or larger group meetings may also be appropriate. It is important to know that your voice and opinions do matter!

Regulation B prohibits discrimination with respect to any aspect of a credit transaction on the basis of race, color, religion, national origin, sex, martial status, age (provided the applicant has capacity to contract), receipt of income from public assistance programs, and good faith exercise of any rights under the Consumer Credit Act. The regulation applies to all persons who, in the ordinary course of business, regularly participate in the decision regarding whether or not to extend credit or the amount that is to be extended.

If you feel that you have been unfairly denied credit based on your race, sex, national origin, religion you may voice you complaint at: