Community Reinvestment Act
The Community Reinvestment Act (CRA) is a 1977 US federal law requiring the federal banking agencies to encourage the banks they supervise to meet the credit needs of the communities where they operate, including low- and moderate-income neighbourhoods, consistent with safe and sound operation. Examiners rate each bank's record, which weighs on its applications for mergers, acquisitions and branches.
- Also known as
- CRA, Community Reinvestment Act of 1977, CRA 1977
- Enacted
- signed by President Carter on 12 October 1977 as Title VIII of the Housing and Community Development Act of 1977, to counter redlining
- Covers
- FDIC-insured banks and savings associations, examined by the Federal Reserve, the FDIC or the OCC; credit unions and non-bank lenders fall outside it, though some state laws reach them
- Ratings
- Outstanding, Satisfactory, Needs to Improve or Substantial Noncompliance, with a public written evaluation; the method depends on size — in 2025, banks with $1.609bn or more of assets faced lending, investment and service tests, smaller ones lighter tests, with thresholds adjusted annually
- Where it bites
- regulators consider a bank's CRA record when deciding merger, acquisition and branch applications, and the public can comment on and protest those applications
- Current rules
- a 2023 overhaul by the three agencies was challenged in court; in July 2025 they proposed rescinding it and restoring the 1995 regulations, which they continue to apply
How the Community Reinvestment Act works in practice
A CRA examination compares where a bank takes deposits with where it lends and invests. Large banks are assessed on lending, investment and service tests; intermediate small banks on lending and community development; small banks on a streamlined lending test. Wholesale and limited-purpose banks can be assessed on community development alone, and any bank can ask its regulator to approve a strategic plan with its own measurable goals. Assessment areas are drawn around branches — which is why the 2023 rule's attempt to count lending by branchless banks beyond them was contested.
The rating matters most in a transaction. When a bank applies to merge or buy another, its regulator weighs the CRA record, and community groups can use the comment period to protest; heavily contested applications have gone to public hearings. A weak rating can delay or sink a deal; a strong one removes a line of attack. Buyers of banks therefore review the target's performance evaluations and fair-lending findings in diligence and build comment periods into the timetable.
For fintechs the Act works indirectly. A fintech lender is not covered, but its partner bank is, and the loans the bank originates through the programme are the bank's loans. A fintech that becomes an insured bank, including through an industrial loan company charter, takes on CRA obligations with it.
For an investor, the CRA is part of the cost and timetable of any US bank deal and of any fintech strategy that runs through a bank.
Example
A regional bank with $12bn of assets agrees to buy a $3bn community bank, with completion expected in six months. Its last CRA rating was Satisfactory, but the evaluation noted low mortgage lending in two majority low-income counties inside its assessment area. During the comment period a coalition of local groups files a protest citing that finding, and the regulator extends its review. The bank responds with a three-year plan: $400m of mortgage and small-business lending in low- and moderate-income tracts, two branches kept open that the deal model had closed, and a named officer accountable for delivery. The approval arrives four months late. The two branches cost $1.5m a year to run, and the delay pushes back the cost savings in the deal model by a quarter.
Common mistakes
- Treating the CRA as a compliance formality rather than a condition of every bank acquisition. - Assuming a fintech's lending falls outside the Act when it runs through a covered partner bank. - Planning branch closures in a deal model without checking their effect on low- and moderate-income areas. - Relying on the 2023 rule's framework when the agencies still examine under the 1995 regulations. - Leaving the comment period and possible hearings out of the merger timetable.