The purpose of the Community Reinvestment Act (CRA) is to help encourage financial institutions, such as banks and credit unions, to provide for the credit needs of all members of all communities in which they operate, including low-income and middle-income communities.
The U.S. Congress passed the CRA in 1977 to reduce discriminatory practices in extending credit in low- and middle-income neighborhoods. These practices are known as “redlining.” Redlining sometimes used blanket refusals by banks and other financial institutions to lend money for home purchases in particular areas. The CRA has been amended and revised many times since it was originally passed.
Essentially, the federal Office of Comptroller of Currency (OCC) collects data on the investment, lending, and service practices of each bank branch and then assesses how these aspects of the branch add up to the needs of the community in which the branches do business. The CRA is meant to make sure that all citizens get a fair chance at obtaining credit no matter where they live.
All banking institutions that receive Federal Deposit Insurance Corporation (FDIC) insurance must be evaluated by federal banking agencies to determine if the bank offers credit consistently with safe and sound operation in all communities where they are chartered to do business.
The law does not specify explicit criteria for evaluating the performance of financial institutions in this regard. Rather, it requires the evaluation process to accommodate the circumstances of each institution. Federal regulations direct federal agencies’ conduct in evaluating a bank’s compliance in five performance areas. There are twelve assessment factors. This evaluation of a bank results in a rating and a written report. These are added to the federal supervisory record for that bank.
As noted above, the law stresses that an institution’s CRA activities should be done in a safe and sound manner. So, it does not require them to make high-risk loans that may cause an institution to lose money.
The impact of an institution’s CRA compliance record comes into play when banking regulatory agencies review the record of a bank or other financial institution at any time when the institution seeks to expand through merger, acquisition, or opening new branches. There are no other penalties for non-compliance with the CRA.
How Is the Act Enforced?
After the OCC gathers information on each branch bank, it prepares a report that assesses how well that branch of a particular bank is meeting the needs of the community in which it operates.
This report is considered by the FDIC whenever the bank requests to open a new branch or transfer the location of a particular branch. In other words, because banks want to expand and change locations to improve their business operations, they are motivated to abide by the CRA.
Is the OCC Assessment Available to Me?
The OCC makes its report about each bank available to the general public. The Federal Financial Institutions Examination Council (FFIEC) coordinates information from various federal agencies about the CRA.
Information and the CRA ratings of individual banking institutions from the three agencies responsible for assessing them, the Federal Reserve Bank, the FDIC, and the OCC, can be accessed on the website of the FFIEC. These ratings were first made available by the Clinton administration to increase public participation and public comment on CRA performance.
The report contains a rating of how the bank has met the credit needs of the consumers in the community. A person can look at this report before deciding to become a customer at a certain bank because it helps them assess how they may be treated as a customer at that bank when they try to get credit, e.g., a mortgage loan to buy a home. In addition, a private person could provide commentary to Congressional committees assessing the law and contemplating changes to it.
However, the CRA is not designed to help someone who may have experienced discrimination in lending, e.g., when applying for a mortgage loan. Other laws serve that purpose.
What If I Experience Discrimination in Housing?
For example, the Fair Housing Act is a federal law that protects people from unfair treatment in housing situations. Specifically, it prohibits discrimination in housing based on race, color, gender, family status, age, disability, religion, and national origin. A person who believes that they have experienced discrimination in housing may file a complaint online at the website of the federal Department of Housing and Urban Development (HUD). Or a person can call their nearest HUD office for assistance.
A person can also make a complaint of discrimination in housing with their local or state government. The Fair Housing Justice Center can identify local organizations that might be able to help. The National Fair Housing Alliance is also a good place to turn to for help with housing discrimination.
Still another option for a person who believes that they had experienced discrimination by a mortgage lender when they applied for a mortgage loan is the federal Consumer Finance Protection Bureau (CFPB). A person can file a complaint with the CFPB online at its website.
The CFPB reports that it sends over 10,000 complaints about financial products and services to companies weekly. Companies must respond to the complaints.
The CFPB sends a complaint to another federal agency if it believes a different agency would better help a person who has filed the complaint. So, it is a good place to start. According to the CPFB, most companies respond to the complaints sent to them by the CPFB within 15 days.
If a complaint filed with a federal agency such as the CFPB has not resulted in a satisfactory resolution of a person’s claim of discrimination in lending, a person can consult with a lawyer who specializes in housing discrimination litigation to discuss the possibility of filing a lawsuit in civil court.
Of course, a person is going to do this only if they have suffered significant economic loss because the cost of prosecuting a civil lawsuit is high. In addition, it requires a large time commitment. But consulting with an experienced lawyer can help determine if a person’s experience justifies the time and expense of a lawsuit.
You should contact a lawyer if you have any questions, concerns, or legal disputes involving discrimination and housing that might affect your legal rights.
What Should I Do If My Bank is Not Doing Its Part to Comply with the CRA?
The OCC encourages members of all communities to report any complaints a consumer may have about the lending practices of a bank branch that serves their community. In addition, if you feel you have been the victim of lender discrimination, you may want to contact a housing discrimination lawyer who has experience with borrower’s rights and seeking redress for discrimination in connection with housing.
Your financial attorney can advise you of your rights, whether you have been wrongly denied access to credit, and whether you are entitled to any monetary damages in a lawsuit against a bank or other financial institution. They can also provide you with legal representation in the event that you need to attend any important court hearings.
