The Community Reinvestment Act (CRA) was a landmark civil rights law passed in 1977 to reverse redlining patterns and address fairness and financial inclusion in access to housing and credit. The CRA requires banks to serve the credit needs of communities where they take deposits, including low- and moderate-income communities. In May, the three agencies responsible for administering the CRA (Federal Reserve; Federal Deposit Insurance Corporation; and Office of the Comptroller of the Currency), released a Notice of Proposed Rulemaking (NPR), representing the most significant changes to the CRA regulation and exams since 1995. The NPR gives the public an opportunity to submit comments before the proposed rules are enacted. Transform Finance took this opportunity to comment on the need for the CRA to go beyond historic measures and be used as an opportunity for shifting decision making power to BIPOC and working class communities.
Since the 1995 reforms, some significant inequities that CRA is supposed to address have barely budged. Racial disparities in lending and wealth creation have persisted or even worsened. Beyond the availability of capital, the inequitable and unaccountable influx of place-based lending capital has been used to displace longstanding residents in certain communities, create low-quality jobs, and reshape urban landscapes for the benefit of large corporations. This has all led to disparities in wealth, jobs, education, and health for BIPOC communities, as compared to white communities.
We at Transform Finance appreciate the opportunity to influence the future development of the CRA through the NPR process. In our letter, we urge the agencies to codify and deepen formal mechanisms for public engagement, drawing on our work with Participatory Investing. If CRA is improved through deepening public engagement and the accountability of banks to communities, we believe the proposed rule could help reduce inequalities, disinvestment and other disadvantages in America’s overlooked communities. However, to fully meet its goal of incentivizing banks to meet the credit needs and contribute to the development of the local communities in which they are chartered, the CRA must be recognized as a participatory process that recognizes community members as capable advisors and experts.