CRC uses the federal Community Reinvestment Act (CRA) to advocate for concrete commitments from financial institutions that operate in California. Signed into law in 1977, CRA requires banks to lend, invest, and provide financial services in low and moderate income neighborhoods. The law explicitly prioritizes “safety and soundness” as a criteria for lending activity. CRC members identify community needs, monitor bank practices and promote new products and approaches through semiannual meetings with major banks and engaging with federal financial regulators.
The Community Reinvestment Act has been one of the most important laws for building wealth and revitalizing neighborhoods. CRC has successfully negotiated Community Reinvestment Act (CRA) agreements or program commitments to meet lending and financial service needs of California’s underserved communities. In addition, we use the CRA examination period as an opportunity to comment on bank’s lending patterns and practices, and ensure that banks are reinvesting in the communities from which they profit.
Merger applications provide another opportunity for community groups to inform federal regulators about whether or not the bank serves the lending, investment and service needs of the communities in which the bank is chartered. Banks must submit an application to one of the three federal banking regulators (the Federal Reserve, the Federal Deposit Insurance Corporation and the Comptroller of the Currency) to merge with other banks. While the majority of applications are approved, they can be approved with conditions that are presented by community groups during the comment period. In the fall of 2011, CRC successfully mobilized 70 members to write letters to the Federal Reserve regarding the proposed Capital One/ING Direct merger. This mobilization resulted in hearings in San Francisco where dozens of California groups shared their comments and experiences with the Fed.
Improvements to CRA: While the CRA has played an important role in communities, we also believe it can be improved. For example, a January 2015 report about CRA exams found that 97% of banks have received a "Satisfactory" or "Outstanding" grade. Advocates, including CRC, are concerned that such a high approval rating is indicative of the exams not working as intended. CRC has written detailed suggestions to the bank regulators on potential improvements to the CRA, which can be viewed below:
The Community Reinvestment Act requires banks to serve the financial needs of low-income communities.