Technology and commerce, unfortunately, always seem to move too fast for the law to keep up. Social media had already become a staple of modern culture before its functions and money-making operations could be evaluated by elected representatives.
The same thing happened with the Community Reinvestment Act, which aimed to give more housing opportunities to lower-income communities but wasn’t reexamined after the boom of the internet in the financing sector. That is until now.
Re-reinvesting in the community
The Community Reinvestment Act (CRA) is a piece of legislation meant to encourage banks and saving associations to help meet the credit needs of and increase lending to borrowers from low-to-middle income communities. It essentially was made to give lower-income communities a fairer chance at buying homes and having access to affordable housing. It was passed in 1977 and hasn’t been revised since 1995.
Many banks don’t like the CRA very much, complaining that it is costly and is too strict on reporting. Advocates for affordable housing, however, maintain that it has been invaluable for equal housing opportunities.
“The CRA is one of our most important tools to improve financial inclusion in communities across America, so it is critical to get reform right,” said Lael Brainard, the Federal Reserve vice-chair. “It evaluates bank engagement across geographies and activities in order to ensure the CRA is effective in supporting a robust and inclusive financial services industry.”
Since 1995, online and mobile banking have become huge parts of the financial industry and haven’t been evaluated and regulated by fair housing guidelines.
On Thursday, bank regulators recommended sweeping changes to CRA to make sure that banks aren’t engaging in “redlining,” or avoiding investing in areas usually populated by minorities and lower wage earners. The changes will also offer clearer and more public ways of assessing large financial institutions.
While larger banks don’t like the proposal, saying that it would be expensive and overreaching, the proposals have enough support to continue, and it will be open to public comment through Aug. 5, with anticipation that it would take effect a few months after publication in the Federal Register.
