What’s Next for the Community Reinvestment Act?

Washington is pretty consumed with big issues of impeachment and government budgets nowadays, but lots of interesting and important debates on other issues are also underway.  One big one concerns reform of the Community Reinvestment Act (CRA), the 1977 law that reviews and assesses bank performance in terms of lending and other activities focused on low-income communities.   Among other things, the CRA was originally designed to combat “red-lining” and to encourage more bank investment in distressed communities.  (For background on CRA’s impacts, check out this 2019 Urban Institute report.)

Federal agencies have been debating CRA modernization and receiving community and industry input for some time.  Last week, the Office of the Comptroller of the Currency (OCC) released its draft proposals for CRA modernization.  There’s a lot in this plan, which weighs in at 240 pages in length.  One primary focus is to clarify what activities and investments count for CRA credit.   Nearly all observers agree that banks need more clarity and guidance on CRA-related investments, but many advocates for distressed and under-capitalized communities are worried about the current draft.  They argue that the new rules are too “loose” and will encourage investments in projects, such as sports stadiums or higher-priced real estate, that do little to help low income communities and residents.  Big changes in CRA rules could have especially strong impacts on sectors like the Community Development Financial Institutions (CDFI) industry, which relies heavily on CRA-related investments.

We will soon be in the midst of a 60 day comment period on the OCC’s proposal.  If you have ideas and inputs, please share them so that they can be considered before a final rule is promulgated in spring 2020.  You can also learn more about positions on all sides of the debate from the American Bankers Association to the Opportunity Finance Network to the National Alliance of Community Economic Development Associations.  CRA has been, and will continue to be an important tool in our community development toolbox.  Thus, it’s essential that we find ways to ensure that these dollars are invested in a manner that best supports economic and community development.