Redefining Finance: The Community Reinvestment Act’s Bold Leap into the Digital Age

In 1977, the Community Reinvestment Act (CRA) was established to address lending inequities, emphasising reinvestment in underserved communities. Yet, with the rise of digital banking, our understanding of ‘community’ has transformed. Now, an updated CRA is here to align with this digital evolution. This post will explore the revised CRA’s implications for banks and their communities in today’s digital era. Join us in understanding community reinvestment in our modern age.

Background: The CRA’s Journey from 1977 to Today

In 1977, the Community Reinvestment Act (CRA) emerged as a pivotal response to redlining and economic discrimination against underserved neighbourhoods. More than just a restrictive guideline, the CRA uniquely positioned banks with a proactive role, urging them to support and invest actively in historically marginalised communities. Over time, the act’s influence was evident as financial institutions established branches, offered credits, and funded community development projects, continuously monitored under the CRA’s directive.

However, the dawn of the 21st century brought a transformative shift in banking. With the advent of digital platforms, online transactions, and a decline in the prominence of physical bank branches, the once-clear parameters of the “community” began to blur. The digital age posed an existential question for the CRA: How could it remain pertinent in an era where banking transcended physical boundaries? Acknowledging this evolution, regulators, guided by industry experts and community advocates, undertook a thorough reevaluation of the CRA, leading to its modern iteration tailored to meet the nuanced demands of digital banking.

Strengthening the Core Purpose of the Statute: A Renewed Commitment to Community Reinvestment

From its inception in 1977, the Community Reinvestment Act (CRA) was designed with a singular vision: to redress systemic inequities in access to credit. Its goal was to ensure that banks served as genuine community partners, catering to the financial needs of all residents, especially those in low- and moderate-income (LMI) areas. With the recent updates, the CRA has been fine-tuned to remain relevant in today’s dynamic banking environment and fortify its foundational objective.

Updated Asset Size Thresholds: Banks are diverse, not just in their operations but also in their scale. To ensure that the CRA’s directives resonate with this diversity, the asset size thresholds have been redefined to capture a more accurate representation of ‘small’, ‘intermediate’, and ‘large’ banks. The revisions are as follows:

  • Small institutions with assets less than $600M, up from the previous limit of $376M
  • Intermediate institutions with assets ranging between $600M and $2B, adjusted from the earlier bracket of $376M to $1.503B
  • Large institutions with assets equal to or exceeding $2B, elevated from the prior benchmark of $1.503B

Reaffirming Commitment to LMI Communities: The modernized rule bolsters banks’ responsibilities towards LMI communities. By emphasizing a need for expansive outreach in credit, investment, and banking services, it nudges financial institutions towards more proactive participation in these areas. This enhanced focus is an embodiment of the CRA’s original intent, ensuring that marginalized communities aren’t left behind in the financial evolution.

Financial Inclusion through Strategic Partnerships: In addition to serving LMI communities, the new provisions also underscore the importance of partnering with Minority Depository Institutions and Community Development Financial Institutions. By doing so, banks can tap into localized expertise and insights, enabling more targeted and effective interventions in areas that need them the most.

Incorporating High-Need Areas: Beyond the traditional LMI bracket, the updated CRA also highlights the significance of Native Land Areas, persistent poverty regions, and other high-need zones. By spotlighting these often-overlooked areas, the rule ensures that a broader spectrum of underserved communities benefits from the banks’ reinvestment endeavours.

Embracing Digital Inclusivity: The digital divide remains a pressing concern in many LMI areas. Recognizing this, the updated rule encompasses provisions to ensure that the shift towards online and mobile banking doesn’t inadvertently sideline these communities. By weaving in digital inclusivity into its fabric, the CRA ensures that the move towards digital banking is both progressive and equitable.

Adapting to the Digital Evolution: Recognizing the Expanded Role of Online and Mobile Banking

The banking sector has not been untouched by this transformation in a world that has swiftly pivoted towards digitisation. As brick-and-mortar branches have gradually given way to online platforms and mobile apps, the very nature of banking has evolved. Recognising this seismic shift, the updated CRA regulations have been meticulously crafted to reflect the changing dynamics of the banking industry, particularly emphasising the burgeoning role of mobile and online banking.

Branchless Banking and its Implications: One of the most significant shifts in recent years has been the rise of branchless banking. With financial services now available at the tap of a screen, customers no longer rely solely on physical branches. The updated CRA rules consider this trend, ensuring that banks’ obligations are no longer tied merely to their physical locations but extend to where they have significant digital customer interactions.

Inclusion in the Digital Age: While digital banking offers unparalleled convenience, there’s also a risk that certain demographics, especially those in LMI communities, might be left behind due to limited access to technology or digital literacy. The revamped CRA addresses this by emphasizing the need for banks to ensure that their digital services are accessible, inclusive, and beneficial to all segments of the population.

Hybrid Banking Models: As physical and digital banking lines blur, many institutions have adopted hybrid models, blending traditional services with digital offerings. The CRA’s new provisions acknowledge this trend, establishing frameworks that assess banks’ community reinvestment efforts in both realms.

Data-Driven Assessments: With the rise of digital banking comes a deluge of data. The updated regulations harness this data-driven approach, allowing for more precise assessments of banks’ outreach and impact. This ensures that banks’ efforts are more targeted and introduces a layer of transparency and accountability to their operations.

Ensuring Clarity and Consistency: A Closer Look at the Updated CRA Regulations

One of the overarching objectives of the revised Community Reinvestment Act (CRA) regulations is to amplify clarity and instil greater consistency in its application. Stakeholders, ranging from banks to community leaders, have long voiced concerns about the interpretative challenges posed by previous iterations of the CRA. The updated rule directly addresses these concerns, paving the way for a more transparent and coherent application of the regulations. Here’s how the rule endeavours to achieve this aim.

Introduction of New Metrics and Benchmarks: A well-defined evaluative framework is pivotal to achieving objective assessments. To this end, the rule introduces new metrics and benchmarks to assess retail lending performance. These metrics are not just numbers but have been designed to translate directly into insightful performance conclusions. The result? Banks will better understand how their lending activities measure up against established standards, ensuring transparency and a shared evaluative baseline.

Elevating Community Development Activities: The CRA has always emphasized the critical role of Community Development activities, especially those catering to Low- and Moderate-Income (LMI) individuals and communities, as well as small businesses and farms. The revised rule:

  • Details activities that will receive CRA credit, such as initiatives related to affordable housing, ensuring that institutions know where to direct their resources for optimal CRA alignment
  • Provides for a public list and approval process which creates a dynamic repository, accessible to all, that confirms an activity’s CRA eligibility, thereby ensuring that institutions and communities alike have a clear point of reference
  • Emphasizes evaluating CD activities, not just based on their volume, but in light of their tangible impact, ensuring that the activities genuinely resonate with the needs of the communities they aim to serve

Balancing Data Collection with Bank-Specifics

In an age of data-driven decision-making, collecting the right data while avoiding undue burdens is essential. The updated CRA rule showcases an understanding of this delicate balance. Designed to cater to banks of varying sizes, the rule integrates different data collection and reporting standards.

Focused Data Collection Approach: While larger banks often have the infrastructure and resources to handle more extensive data-related requirements, the same is not always true for their smaller counterparts. Recognizing this disparity:

  • Small and intermediate institutions in these categories are shielded from the new data collection mandates that come into play for banks boasting assets of $2 billion or more
  • Large banks with assets exceeding $10 billion are subject to certain enhanced data collection and reporting stipulations

Utilizing Existing Data Sources: The rule prioritizes using pre-existing data wherever feasible, reducing redundancy and easing the load on banks.

Fostering Openness through Transparency and Public Participation

For the Community Reinvestment Act (CRA) to function optimally, fostering an open dialogue between banks, regulatory agencies, and the public is pivotal. The latest rule amplifications emphasize this symbiotic relationship.

Making Data More Accessible: Enhancing data visibility, the rule integrates deeper insights from the Home Mortgage Disclosure Act (HMDA) for large banks. It highlights borrower details like race, ethnicity, and income specific to assessment areas. This data, primed for clarity, will be hosted on agency websites purely for informational access.

Prioritizing Public Feedback: Banks will now receive direct transmissions of public comments routed through agencies about their CRA performance. Furthermore, the door is open for public input on community needs and opportunities, advocating for a two-way communication flow.

Empowering Decision-making with Advanced Tools: To foster understanding and informed decisions, there’s a commitment to launch data tools that can dissect reported loan data, leading to precise metric and benchmark calculations across varied geographies. This offers banks and the public a lens into performance standards over recent years.

Ensuring Equitability in CRA and Fair Lending Obligations

The revised rule underscores that a bank’s responsibility to the Community Reinvestment Act (CRA) and fair lending go hand in hand. Banks are expected not only to cater to the entire spectrum of their communities but to do so with fairness at the forefront.

Specifically, the rule:

  • Firmly rules out any bank initiatives that delineate facility-based assessment regions due to illegal discrimination or unjust exclusion of Low and Moderate Income (LMI) census tracts
  • Preserves and elaborates on the stipulation that a bank’s CRA rating can face downgrades if discriminatory or any other unlawful credit practices come to light.

Ensuring Uniformity Across Regulatory Agencies

Uniformity in approach is crucial when multiple agencies are at play. Recognizing this, the updated rule ensures:

  • A harmonized strategy among the three banking agencies, echoing feedback from stakeholders on the necessity for uniform regulations
  • An ongoing commitment from the agencies to foster consistent implementation this will be achieved through collaborative efforts like examiner and industry training, standardized examination procedures, and the collective release of a list showcasing eligible Community Development (CD) activities.

Highlights of the Revised Final Rule

After considering the feedback from comment letters and conducting further agency assessments, notable revisions have been made to the proposed rule in the finalized version.

Streamlining Evaluations: The requirements for complexity and data have been reduced to streamline the evaluation process. Nonetheless, a comprehensive approach is still in place when evaluating banks under the Retail Lending Test. The major product lines previously evaluated have been condensed from six distinct categories down to three: closed-end home mortgage loans, small business loans, and small farm loans. 

Moreover, the evaluation of automobile lending has become more specialized. It’s now specifically tailored to banks where the majority of their lending – over half – is rooted in automobile loan purchases or originations, taking into account other lending areas such as home mortgages, multifamily loans, small business, and small farm loans. Additionally, the provision exists for those banks that actively opt for an assessment of their automobile lending practices.

Refining Retail Lending Criteria: The revised standards have been calibrated to make the attainment of “Low Satisfactory,” “High Satisfactory,” and “Outstanding” conclusions under the Retail Lending Test more realistic, all while upholding appropriate and regionally tailored standards. For larger banks, there has been a shift in emphasis: retail activities and community development (CD) activities now carry equal weight, in contrast with the previously proposed 60% retail and 40% CD split. This change, which garnered broad support from stakeholders, is aimed at encouraging banks to give equal attention to CD initiatives as they do to retail endeavours, thereby fostering a more balanced approach in their ratings.

Maintaining Assessment of Significant Non-Branch Retail Lending with Enhanced Tailoring: The final rule refines the criteria for outlining retail lending assessment areas (RLAAs) with a keen focus on recent lending behaviours. Observations reveal that nearly a quarter of large bank mortgage lending and close to 40% of small business lending that occurs outside of facility-based assessment areas (FBAAs) will now be scrutinized within RLAAs for the first time. However, banks predominantly operating through physical branches, with over 80% of their retail lending within FBAAs, are granted an exemption. 

Furthermore, the rule elevates the minimum loan count that activates RLAAs, transitioning from 100 to 150 for closed-end home mortgage loans and 250 to 400 for small business loans. Additionally, RLAAs will only consider specific product lines like home mortgages or small business loans if they meet these revised thresholds, excluding other product lines from evaluation. 

The interagency analysis, grounded in CRA data from 2018 to 2020, projects that these amendments will approximately halve both the number of large banks needing to define RLAAs and the total number of RLAAs formed based on historical lending. Nevertheless, the regulations remain attuned to banks with pronounced clusters of retail loans beyond the confines of facility-based assessment areas.

Integrating Metrics and Impact Factors for Bank CD Financing: The revised guidelines introduce an extra metric for evaluating CD financing, specifically targeting banks with assets exceeding $10 billion. This new metric emphasizes certain Community Development (CD) investments in relation to deposits, allowing examiners to assess bank investments under programs like the Low-Income Housing Tax Credit and the New Markets Tax Credit. 

High-performance ratings under this metric will be positively regarded. Furthermore, introducing an impact factor acknowledges the substantial contributions made by investments in the Low-Income Housing Tax Credit and New Markets Tax Credit programs towards affordable housing and broader community development.

Streamlined Strategic Plan Option for Addressing Community Needs: The rule sheds light on the option for all banks to seek evaluation under a designated strategic plan, offering added adaptability for those with unconventional business models. For these strategic plans to be considered, they must incorporate feedback from the community. Moreover, if a bank’s plan veers from the standard performance tests, it should clearly indicate its ongoing commitment to addressing the credit requirements of its communities.

Grants Banks Extended Time for Rule Adaption: The rule now provides banks an extended period to align with the new requirements. Instead of the initially proposed 12-month timeframe, banks will have over 24 months from when the rule is adopted and published on the agency websites. This extension balances the industry’s appeal for more time and the aim to execute the regulations promptly.

Clarification on CRA Rating Downgrade Provisions: The provision for CRA ratings downgrades continues to uphold the existing standard, focusing solely on “discriminatory or other illegal credit practices.” This is in contrast to the initially proposed scope that sought to include both credit and non-credit practices.

Prioritizing Small Business Loans in Economic Development Evaluations: The rule permits certain loans to small businesses, which pass a specific size and purpose test, to be recognized as community development loans under the economic development category. These loans will also be evaluated as retail loans, ensuring dual consideration for their contribution to community growth.


The revamped Community Reinvestment Act (CRA) rules reflect a balanced synthesis of stakeholder feedback, aiming to streamline processes, bolster transparency, and champion equitable lending practices. By emphasizing the efficient use of data, fostering open dialogue, and ensuring consistent inter-agency collaboration, the modifications provide clearer guidelines for banks and solidify the industry’s commitment to serving the diverse needs of all communities. With added flexibility and clarified metrics, banks are better positioned to align with the CRA’s spirit and specifics, ensuring their operations truly benefit their communities.

However, we understand that comprehending the nuances of the revised CRA can be challenging. Take the next step towards strengthening your institution’s community investment strategy. Our team of experts at RADD LLC is prepared to navigate you through the dynamic terrain of the Community Reinvestment Act. We invite you to schedule a free consultation here, and together, we can customize a CRA approach that resonates with your institution’s goals and the wider community’s needs. Don’t leave your community engagement and reputation to uncertainty. Let’s collaboratively sculpt your institution’s community-focused roadmap.