The Spirit and Color of CRA: Greater Emphasis on Communities of Color in the Community Reinvestment Act

Key Takeaways

  • Our diverse nation could be stronger if we work to unleash capital in communities of color.
  • Although unravelling systemic racism won’t happen overnight and CRA is not the silver bullet, we must acknowledge that we can do better.


CRA regulations and exams focus on evaluating bank lending, investments and services to borrowers and communities with low-and-moderate income (LMI). During the Civil Rights era, when CRA legislation was considered, community advocates and local public sector officials testified during congressional hearings that redlining was pervasive in communities of color.[1] NCRC continues to advocate for the inclusion of people and communities of color on CRA exams to address continued racial discrepancies in lending. Our principles for CRA modernization include a more meaningful approach to addressing racial inequality that goes beyond targeting borrowers and communities with LMI. 

Communities of color generally refers to neighborhoods, census tracts or counties that are majority African American, Hispanic, Asian or Native American. Greater emphasis on communities of color is especially relevant in consideration of growing wealth and income disparities, the disproportionate and adverse impact on minority communities from the COVID-19 pandemic and the global protests denouncing police brutality and racism. Moreover, the full impact of COVID-19 on communities of color might not be fully understood until 2021 or later because the economic situation continues to unravel. Although CRA is a color-blind law that uses income as a proxy to address minority individuals and neighborhoods, moving forward, we should pursue a more specific and intentional focus on supporting people and communities of color with CRA. 

NCRC’s Overall Advocacy

Some fair lending sections in CRA exams prior to 1995 included greater emphasis on communities of color. NCRC continues to advocate for more detailed fair lending reviews using HMDA data in CRA exams to determine whether banks discriminate in lending to people and communities of color. To provide more information to communities, NCRC offers its members custom Fair Lending Reports with HMDA and CRA data at the county level.[2] This puts the power of information into the hands of community groups interested in learning more about the financial lending landscape in their communities. 

NCRC’s comment letter on the OCC’s CRA Notice of Proposed Rulemaking suggested adding underserved census tracts as a criterion on CRA exams.[3]  Recently, NCRC used a data-driven approach for underserved tracts to be considered in CRA exams as a way to direct resources to people and communities of color.[4] NCRC’s proposal created “underserved” classifications for census tracts primarily defined as those with low levels of lending per housing units and businesses in the area. When these census tracts were separated into five distinct quintiles, the two lowest quintiles had higher concentrations of communities of color. Additionally, the two lowest quintiles had higher levels of unemployment and poverty rates. They also had lower average home values and lower average income. Quintile 1, the lowest quintile, could be a specific range of underserved census tracts that regulators use to address communities of color in CRA bank exams. In addition, NCRC’s approach includes periodic updates to the underserved tracts list to sustain the relevance of communities of color in CRA exams for the foreseeable future. NCRC’s latest research forecasted $10 billion more in home and small business lending over five years in communities of color in response to NCRC’S approach.[5]

In contrast, the OCC approaches racial inequality much differently. The OCC wrote in response to NCRC that its approach to provide incentives would address persistent racial inequality. This reveals a fundamental, philosophical difference in how to address racial inequality. The OCC wants to encourage banks by offering multipliers and opportunities for additional CRA credit when a bank does something positive, as if this is something the bank is doing outside of their regular day-to-day business and which will not make the bank money. NCRC’s approach is much different and comes from a conviction that it is time to get serious about racial inequality. We should use the CRA reform process to update CRA to work proactively and intentionally to eliminate racial inequalities. Therefore, our recommended approach would regularly evaluate bank activities to create more wealth in our most underserved communities of color, and score banks positively or negatively based on their efforts. 

NCRC published studies in 2017 and 2019 that revealed how Black and Hispanic business owners received negative treatment when applying for small business loans compared to White applicants. [6][7] Furthermore, in 2020, NCRC with our academic partners studied entrepreneurship in the Atlanta, Georgia, and Washington, D.C., metropolitan statistical areas (MSA) by conducting mystery shopping exercises in the small business pre-application stage of the lending process.[8] The results showed that while most testers received inadequate treatment from banking personnel, women and people of color reported the worst experiences. More recently, NCRC published a study that showed disparate treatment of mystery shoppers when seeking Paycheck Protection Program (PPP) loans and credit in the Washington, D.C., area. The results showed that Black business owners received less encouragement to apply for loans and were offered less product offerings and less information from bank representatives than their White counterparts who had identical financial profiles.[9]

Financial institutions should address these potential Equal Credit Opportunity Act (ECOA) violations by increasing organizational training and compliance programs, continuing to perform mystery shopping exercises and hiring more diverse staff. However, the long-term recommendation is for the Consumer Financial Protection Bureau (CFPB) to implement section 1071 of the Dodd-Frank Act. The section requires financial institutions to collect small business lending information that includes the gender, race and ethnicity of lending applicants, and whether small businesses are women-owned or minority-owned. Congress crafted section 1071 to operate like the Housing Mortgage Disclosure Act (HMDA) data collection processes that capture levels of mortgage lending with borrower demographic information. A comprehensive dataset developed for section 1071 could be an informative and transformative tool for advocacy groups, financial institutions, small business entrepreneurs and policymakers to leverage meaningful small business data to create significant financial reforms. It could also be used for CRA exams to assess lending more accurately for the smallest businesses and those in communities of color. 

CRA Modernization Policy Window 

CRA modernization is on the policy agenda for policymakers, advocacy groups and the federal banking agencies. In May 2020, the OCC published a CRA Final Rule that attempted to update CRA, however, the Federal Deposit Insurance Corporation (FDIC) and Board of Governors of the Federal Reserve System (Board) did not agree with the substantive changes and decided not to sign-on. The OCC’s revisions to CRA violate the intent and purpose of CRA and NCRC has sued the agency as a result. As the OCC looks to publish an additional NPRM to solicit advice to make the incomplete final rule workable; the FDIC and Board are also developing regulatory changes to CRA. As mentioned above, the OCC prefers to give CRA credit when banks do something good, such as CRA eligible activity wherever it occurs, but NCRC wants banks to be held accountable on how well they are serving our most underserved communities. Congress and the federal banking agencies could enhance CRA as a critical policy tool to address systemic economic divestment traditionally rooted in racial discrimination. The current moment presents an exceptional and rare policy window to make positive changes to CRA for a brighter future. 

Considering future implications of CRA on people and communities of color, there are critical considerations that will affect NCRC’s CRA recommendations moving forward. Policymakers and federal banking agencies need to consider expanding CRA to fintechs and independent mortgage companies because of their recent dominance in mortgage loan originations and their growing financial services digital footprint. In the same vein, as fintechs pursue bank charters, their applications must include robust CRA plans with measurable goals. In addition, for CRA-covered institutions, bank affiliate mortgage lending information in CRA exams should be required for financial institutions. Banks typically include affiliate mortgage lending in their CRA exam if their affiliates have positive reviews. Therefore, affiliate lending that is likely to be discriminatory fails to be scrutinized. If these forward-looking trends are not addressed, people of color might continue to pay more for financial services, and this would defeat the original intent of CRA. 


The historical legacy of discrimination in housing and financial services lives on today as scholars, policymakers and citizens can easily observe economic distinctions of neighborhoods throughout America’s core urban centers. As the disproportionate impact of COVID-19 on minorities and communities of color multiplies the effects of historical discrimination in housing and financial services, we should pause and reflect on innovative and data-driven approaches to reduce economic divestment in these communities. 

Redlining practices penalized minority communities based on egregious associations of darker skin tones to high risk and low economic value. This perpetuated a now self-fulfilling prophecy where some banks do not see the value in making investments in communities of color. Therefore, CRA exams should and must include analyses on bank lending, investments and services to people and communities of color because these are the communities that were originally redlined and are often exploited by predatory lending.[10][11] The legacy of discrimination includes colorful maps with glaring red lines, drawn around black and brown communities. Therefore, we cannot keep color out of CRA.

Although unravelling systemic racism embedded in our financial system is not an overnight fix and CRA is not the silver bullet, we must acknowledge that we can do better and continue to ask ourselves, “Are we satisfied with perpetuating inequality?” Our diverse nation could be stronger if we work vigorously to unleash capital in communities of color. NCRC will continue to take a stronger stance on these economic issues that are often portrayed as social issues to advance our vision of a just economy. 

Zo Amani is NCRC’s Community Reinvestment Act Coordinator.

Photo by Christina @ wocintechchat.com on Unsplash


[1] NCRC. (2019). Testimony of Jesse van Tol, CEO, national community reinvestment coalition. Consumer Protection and Financial Institutions Subcommittee. Retrieved from: https://ncrc.org/testimony-of-jesse-van-tol-ceo-national-community-reinvestment-coalition-april-9-2019-consumer-protection-and-financial-institutions-subcommittee/

[2] Fair lending reports: https://ncrc.org/fair-lending-report/ 

[3] NCRC. (2020). NCRC comments regarding notice of proposed rulemaking (Docket ID OCC–2018-0008 And RIN 3064-AF22). Retrieved from: https://ncrc.org/ncrc-comments-regarding-notice-of-proposed-rulemaking-docket-id-occ-2018-0008-and-rin-3064-af22/ 

[4] Mitchell, B., & Silver, J. (2020). Adding underserved census tracts as criterion on CRA exams. Retrieved from: https://ncrc.org/adding-underserved-census-tracts-as-criterion-on-cra-exams/

[5] Silver, J., Richardson, J. (2020). NCRC proposal for underserved tracts would increase lending in communities of color by billions of dollars. Retrieved from: https://ncrc.org/ncrc-proposal-for-underserved-tracts-would-increase-lending-in-communities-of-color-by-billions-of-dollars/

[6] Bone, S., Christensen, G., Williams, J., Adams, S., Lederer, A., Lubin, P. (2017). Shaping small business lending policy through matched-paired mystery shopping. Available at SSRN: https://ssrn.com/abstract=3035972 or http://dx.doi.org/10.2139/ssrn.3035972

[7] Lee, A., Mitchell, B., Lederer, A., Williams, J., Bone, S., Christensen, G. (2019). Divestment, discouragement and inequity in small business lending. Retrieved from: https://ncrc.org/disinvestment/

[8] Lederer, A., Asante-Muhammad, D., Williams, J., Bone, S., Christensen, G. (2020). Racial and gender mystery shopping for entrepreneurial loans: Preliminary overview. Retrieved from: https://ncrc.org/mystery_shopping/

[9] Lederer, A., Oros, S., Bone, S., Christensen, G., Williams, J. (2020). Lending discrimination within the paycheck protection program. Retrieved from: https://ncrc.org/lending-discrimination-within-the-paycheck-protection-program/

[10] NCRC. (2010). Foreclosure in the nation’s capital: https://ncrc.org/foreclosure-in-the-nations-capital-how-unfair-and-reckless-lending-undermines-homeownership/

[11] NCRC. (2015). Home mortgage and small business lending in Baltimore. Retrieved from: https://ncrc.org/home-mortgage-and-small-business-lending-in-baltimore-and-surrounding-areas/

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