Why We Need A Strong Community Reinvestment Act (CRA)

Federal regulators have proposed rolling back key parts of the Community Reinvestment Act (CRA), a landmark civil rights law that requires banks to serve their entire communities, including low- and moderate-income neighborhoods. This proposal could result in substantially less financing for first-time homebuyers, small business owners, and low- and moderate-income families — many of whom already struggle to obtain affordable credit. At Beneficial State Foundation, we are advocating in support of a strong CRA.

What is the CRA, and why does it matter?

For 50 years, the CRA has required banks to meet the credit and community development needs of the entire communities where they take deposits, including low- and moderate-income neighborhoods. Many of those neighborhoods were shut out of lending for decades by redlining and disinvestment, and the impacts are still felt today.

Since 2010, CRA has helped drive nearly $5 trillion in mortgages and small business loans that expanded homeownership, fueled entrepreneurship and strengthened communities across the country. 

Under CRA, regulators evaluate how well each bank meets community needs. If a bank receives a poor CRA rating, it can impact their ability to merge with other banks, acquire assets, or open new branches. 

What would the proposal change?

The proposed rules would weaken transparency and accountability for banks, and reduce their obligation to invest in low- and moderate-income communities. An analysis by the National Community Reinvestment Coalition (NCRC) finds that 85% of current community development activity at the country’s largest banks could be at risk, sapping over $87 billion a year in investments from affordable housing, small businesses, and more. About 800 banks would no longer receive a CRA evaluation. 

Additionally, around 400 banks will no longer be required to collect data that helps identify persistent credit gaps and banking deserts, which in turn hinders efforts to develop vibrant local, state, and regional economies.

The broader push against fair lending

The CRA proposal is the latest in a series of federal moves that weaken fair lending enforcement. In recent months, regulators under the Trump administration have eliminated disparate impact analysis and rescinded guidance on Special Purpose Credit Programs — both tools that help banks identify and reach underserved borrowers. They’ve also narrowed demographic data collection in small business lending, barred race- and gender-conscious program design from Community Development Financial Institution (CDFI) Fund awards, and directed banks to treat a borrower’s immigration status as a credit risk factor. 

Each change can look small and procedural on its own. Taken together, they chip away at the system that holds lenders accountable for treating every borrower fairly.

What bank leaders can do now

Regardless of what happens in Washington, regulation only sets the floor and every bank can choose to build above it. Here are some steps you can take to keep serving your communities equitably:

• Know what the rules actually say. Look closely at each change’s scope, how it will be enforced, and what the regulatory consequences might be. Some, like the rescission of Special Purpose Credit Program guidance, don’t change the underlying legality of the practice.
• Keep collecting data. Even if you’re no longer required to report it, data shows where credit and deposit needs are going unmet in your markets and how you compare to competitors.
• Set your own goals. Community impact goals don’t depend on regulatory oversight. Look at which communities you aren’t fully serving and start closing those gaps now.
• Deepen your CDFI partnerships. CDFIs lend in every state and every congressional district, and they’re absorbing the most direct impact from these changes. Ask how you can work together.

You can read our full comment letter to the OCC and FDIC here. In addition, we joined nearly 500 organizations signing onto NCRC’s comment letter.

Resources from Beneficial State Foundation

• Our Guide to Participatory Investing, co-developed with Transform Finance, outlines concrete ways that banks can deepen community engagement and co-design.  
• Our Equitable Bank Standards, co-designed with leaders across the banking industry, offer a practical framework for this work, from board-level impact goals to equitable lending, products, and services. 
• For lenders looking to creatively expand credit access, Underwriting for Racial Justice connects underwriters, impact leaders, and innovators to reimagine credit assessment.

Reach out to our team to learn more about these and other resources.