How to Move the CRA Into the 21st Century

American Banker
4 minute read | November.03.2014

There's a disconnect in the banking agencies' approach to reforming the Community Reinvestment Act.

On the one hand, the Federal Reserve, Office of the Comptroller of the Currency and Federal Deposit Insurance Corp. propose moving the CRA into the 21st century by deemphasizing branches as a means of serving lower-income neighborhoods and individuals. In their recent proposal to amend CRA regulatory guidance, the agencies note that there "are effective alternatives [to branches] in providing needed services to low- and moderate- income geographies and individuals." They specifically cite "technological advances in the retail banking industry, such as Internet or online banking, mobile banking, remote deposit capture and 24-hour Internet banking kiosks."

On the other hand, the starting point for determining the communities in which a bank has CRA obligations remains rooted in 1977, the year the law was enacted. A bank's assessment area is delineated based on where a bank has a physical presence. That a bank may engage in nationwide lending or deposit-gathering through the technological advances listed by the regulators is irrelevant to defining its assessment area.

Originally printed in American Banker; reprinted with permission.