Congress passed the Community Reinvestment Act (CRA) in 1977 to address financial institutions’ history of accepting deposits from residents of low-income and minority communities yet restricting their access to credit. The CRA requires regulators to encourage banks and other depository institutions to meet the credit needs of all communities where they do business.  

This groundbreaking legislation prompted positive changes. Banks bolstered their lending, provided technical support, and partnered on innovative investments in underserved communities. With increased access to capital, many people in these communities have been able to purchase homes, finance businesses, and begin building generational wealth. 

But not all eligible communities have seen benefits from the CRA.  Some Native and rural areas, for example, have seen little investment from banks in the past 40 years. 

After decades without major changes to the CRA, the Federal Reserve and other regulators are writing new rules for the law. These new rules are tailored to account for changes in banking in the internet age. The changes also aim to address the needs of those being left behind in a 21st-century economy.   

Our series dives into some of the creative ways banks and community partners have teamed up to drive change in communities across the US. In blog posts, authors from inside and outside of the Federal Reserve explain the regulation’s genesis and point out its strengths and shortcomings. Fed Governor Lael Brainard explains why regulatory agencies are collaborating to modernize CRA, informed by community members, financial institutions, and others.

Passed in 1977 to address banks’ restricting access to lending dollars for residents of low-income and minority communities, the CRA has prompted banks to lend in low-income communities. Spurred by the regulation, banks have also shared technical support and made investments in these communities. But not all communities have seen benefits from the CRA. 

The Community Reinvestment Act is a landmark piece of legislation in the community development field. Many credit it with slowing discriminatory lending practices by financial institutions, enabling people of color to purchase homes, finance businesses, and begin building generational wealth.

Yet it’s clear that with the persistence of deep racial wealth gaps in the US, this legislation has not been truly transformational in the four decades since its passage. After some 25 years with no major changes, the three major financial regulators proposed CRA rule changes, which likely will take effect in 2022.