In anticipation of the proposed changes to the Community Reinvestment Act (CRA) regulation, NCRC surveyed our member organizations regarding how CRA has benefited communities, what needs have not been met by CRA and what reforms are needed. Fifty community-based organizations filled out an online survey.
Respondents identified two areas of progress in CRA prior to the currently-pending rule changes. Members lauded the creation of down payment assistance programs and microbusiness funding. Some members thought banks offered sufficient support for nonprofit organizations but others thought banks could improve in this area, with some apparent variation by region.
Consensus likely emerged regarding needs not being met. Members discussed a lack of affordable consumer lending and insufficient volume of lending and service to communities of color, while also objecting that regulators have approved all proposed bank mergers.
Suggested reforms included consideration of race in CRA to increase lending, investment and services to Black, Indigenous and People of Color (BIPOC) communities; requiring banks to submit specific plans for rectifying identified shortcomings in CRA performance; recognition in merger approval orders of community benefit agreements; encouraging more affordable consumer lending; and assistance to people of color and modest income people in gentrifying communities so that they will not be displaced.
Of the responding organizations which specifically work to provide housing counseling more than half said that banks have offered them grants for counseling. A larger share (90%) said that bank staff have directly participated in counseling sessions. All types of community-based organizations likewise indicated that more than half of them received grants but that other forms of financing were not as widely available. About one third of them had bank staff on their board of directors but only 10% received technical assistance from banks regarding accounting and financial systems.
The answers suggest that CRA rulemakers should:
- Consider lending, investing and service to BIPOC people and communities in exams;
- Make the merger review process more rigorous and encourage community benefit agreements;
- Refine the proposed community development tests to encourage more types of financing and technical assistance to community-based organizations, including BIPOC led nonprofits;
- Modify exams to encourage more affordable consumer lending and build on the progress in affordable home lending and microbusiness lending, and
- Do more to encourage climate remediation activities.
Below are some specific answers our members provided to the survey.
Needs CRA has met:
- Down-payment assistance/gap grants for affordable homeownership.
- Microbusiness loans.
- Investment in local not-for-profit partners.
- Ability to hold banks to account, try to stop branch closings, encourage lending.
- Foreclosure prevention.
- More small business loans between $25,000-100,000.
- Funding for housing counseling education.
Needs CRA has not met:
- Regulators approve all mergers, documents withheld under the Freedom of Information Act (FOIA).
- Easier access to bank branches – eliminate banking deserts.
- Not enough investment in affordable lending products.
- Affordable consumer loans.
- We have a large Hispanic population in our area and very few banks provide Spanish speaking employees to work with them in understanding banking, setting up accounts and completing transactions.
- Too many loans to Whites in Black neighborhoods, not enough branches, and not enough products and services that encourage Black homeownership.
- Motivating banks to invest in civil legal aid via increased rates of interest on Interest on Lawyers’ Trust Accounts (IOLTA) trust account deposits.
- Not enough investment and philanthropy to Black led-grassroots nonprofits.
- Failure to provide business loans to Black led-businesses.
What reforms are needed:
- Regulators must make merger review more serious, documents should be disclosed while comment periods open, need small business lending data by race.
- When the data indicates credit was limited or not issued in a specific community, banks should develop a plan to correct.
- Making race a CRA consideration.
- Recognize community benefit agreements.
- Reform the tools that determine credit worthiness.
- Making affordable consumer loans and banking the unbanked CRA-qualified activities; establish race-specific goals.
- Ensure that investments in community-driven climate resilience will be credited on the exam.
- CRA should include requirements for Black, minority and low-income individuals and not just areas or communities. A gentrified neighborhood may be considered low-income but the low-income people are not the ones receiving the services.
Josh Silver is Senior Advisor at NCRC.