What Is the Community Reinvestment Act?

The Community Reinvestment Act (CRA)—enacted in 1977—is among the laws created to fight discrimination and unfair lending. What are some of its key characteristics?

Under CRA, federally insured depository institutions have an affirmative obligation to help meet the credit needs of the community where they are chartered, consistent with “safe and sound” banking practices, said Julie Stackhouse, then-St. Louis Fed executive vice president over Supervision, during a Dialogue with the Fed event earlier this year.

In return, these depository institutions have access to the federal safety net, which means federal deposit insurance and the Federal Reserve’s discount window, she added.

However, credit unions and those entities operating outside the insured financial sector do not have this obligation.

“We understand that the institutions covered by the Community Reinvestment Act is a fairly narrow part of the financial services sector, certainly in today’s financial environment,” she said.

Stackhouse also noted that CRA requires both the affirmative obligation to lend and safe and sound lending practices.

“Safe and sound banking practices. Scratch your head, what does that mean?” Stackhouse posed. “That’s a tough one. And I think for bankers, that’s a tough one too.”

Sometimes lending in low- to moderate-income communities is pretty high risk, she added.

Stackhouse, now retired, has written extensively on banking for this blog.

Additional Resources

• Dialogue with the Fed: The Community Reinvestment Act (CRA)—Separating Truth from Myths
• On the Economy: The Rise of Cyber Branches in Banking
• On the Economy: Faster Payments, More Disruptions