The CRA is Not a Fair Lending Law

American Banker
1 minute read | June.06.2014

The ongoing regulatory emphasis on enforcing the anti-discrimination provisions of the Equal Credit Opportunity Act and Fair Housing Act has had an unintended and counterproductive consequence. It is undermining the legislative rationale of the Community Reinvestment Act and threatening its effectiveness.

In regulators' push to root out lending discrimination based on race or ethnicity, they have co-opted the CRA as a fair lending enforcement tool. The last several years have seen a spate of banks with downgraded CRA ratings based solely on evidence of inadequate compliance with other laws. Many of these banks performed well on traditional measures of CRA compliance-that is, on the loans, investments and services provided to their communities, particularly to lower-income individuals and neighborhoods. But evidence of discriminatory or other illegal credit practices overrode even outstanding traditional CRA performance.