Community Reinvestment Act
The Community Reinvestment Act (CRA) is a 1977 U.S. federal law that requires banks to meet the credit needs of the low- and moderate-income communities in which they operate, with their performance evaluated by federal banking regulators.
The CRA was enacted in response to the practice of redlining — the systematic denial of banking services and mortgage lending to neighborhoods based on racial or ethnic composition — that had excluded many urban communities from access to capital for decades. The law does not mandate specific lending quotas; instead, it requires that the federal banking agencies — the Federal Reserve, the OCC, and the FDIC — evaluate each bank's record of meeting community credit needs and take that record into account when reviewing applications for mergers, acquisitions, branch openings, and other regulatory approvals.
Regulators assign CRA ratings on a four-tier scale: Outstanding, Satisfactory, Needs to Improve, and Substantial Noncompliance. Large banks are evaluated across three tests — a lending test (volume and geographic distribution of loans), an investment test (qualified investments such as community development financial institution funding and low-income housing tax credit investments), and a service test (branches and banking services accessible to underserved communities). Smaller community banks are evaluated under a streamlined lending and community development framework.
A poor CRA rating can block a bank's expansion plans and trigger public protests from community groups, which have standing to comment during regulatory review processes. This gives community organizations significant leverage over bank behavior and has channeled hundreds of billions of dollars in community development lending and investment over the decades since the CRA's passage.
The CRA has been periodically revised — most significantly through a major 2023 update by the Fed, OCC, and FDIC that modernized the rules to account for online and mobile banking, which has made the geographic concept of community more complex. The 2023 rules expanded CRA coverage to non-deposit activities and created new assessment areas for banks with significant digital lending outside their physical footprint.
For banks, CRA compliance is both a regulatory obligation and a reputational consideration, particularly during merger reviews when activist opposition based on poor CRA performance can delay or block transactions.