CRA regulations, examination procedures should include explicit focus on race

Not only is it feasible, it is also constitutional to add a robust consideration of race to the requirements of the Community Reinvestment Act (CRA), a new report argues.

The report, from the National Community Reinvestment Coalition (NCRC) and the civil rights law firm Relman Colfax PLLC, calls on CRA regulators at the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve Board to consider a set of proposals that would give regulators a deeper understanding of whether banks are meeting the needs of their entire communities.

The addition of specific requirements to ensure racial equity in bank performance evaluations and enforcement would broaden the crucial but too narrow primary focus on low- and moderate-income (LMI) people and communities.

“Since CRA’s inception, it has been a powerful tool to ensure much-need investment and capital makes it to LMI communities,” said Jesse Van Tol, President and CEO of NCRC. “However, our research has shown that the majority of communities that were redlined in the 20th Century are to this day lower-income and also predominantly communities of color. We know redlining was a racist mechanism. Therefore, it only makes sense to have the one piece of legislation solely dedicated to undoing redlining to have procedures and objectives that also focus on race.”

Some of the report’s proposals are informational, calling for the increased collection, calculation and reporting of data about lending to people and neighborhoods of color. 

Additional proposals focus on how to incorporate a bank’s record of meeting the needs of people and neighborhoods of color in CRA evaluations and ratings. The report acknowledged that these proposals may bring into question Equal Protection issues, but explained how they can be implemented in ways that satisfy the ‘strict scrutiny’ test applied by courts.

These proposals include making adjustments to retail lending, retail services, community development financing and community development services subtests of CRA evaluations, while simultaneously calling for evaluations to consider whether banks arbitrarily exclude neighborhoods of color from their assessment areas, which is not currently prohibited by CRA but should be. 

“Adoption of these proposals will give regulators a deeper understanding of whether banks are meeting the needs of their entire communities, including communities of color,” said Glenn Schlactus, a co-author of the report and a partner at Relman Colfax PLLC, a civil rights law firm in Washington, DC. “This shift would motivate and require banks to do a better job serving communities of color. It’s an important step to close the racial wealth divide and the extreme and enduring homeownership gap between Black and White families. It will bring nearer the day when everyone has fair access to the critical products and services provided by banks. That is the very reason for the CRA.”

To read the full report: https://ncrc.org/adding-robust-consideration-of-race-to-community-reinvestment-act-regulations-an-essential-and-constitutional-proposal


About NCRC

The National Community Reinvestment Coalition and its grassroots member organizations create opportunities for people to build wealth. We work with community leaders, policymakers and financial institutions to champion fairness in banking, housing and business. NCRC was formed in 1990 by national, regional and local organizations to increase the flow of private capital into traditionally underserved communities. NCRC has grown into an association of more than 600 community-based organizations in 42 states that promote access to basic banking services, affordable housing, entrepreneurship, job creation and vibrant communities for America’s working families. More: www.ncrc.org

About Relman Colfax PLLC

Relman Colfax PLLC is a national civil rights law firm dedicated to protecting civil rights and enforcing our nation’s civil rights laws.  Glenn Schlactus is a partner at Relman Colfax PLLC and has concentrated his practice on enforcement of and compliance with civil rights laws. He has been with the firm since 2006.  More: www.relmanlaw.com.

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