US banking regulators have updated the 1977 Community Reinvestment Act (CRA) to address redlining and expand lending to lower-income areas, including online and mobile banking services. The overhaul aims to provide more transparency and consistency in evaluating banks' performance in serving low- and moderate-income communities. However, the changes have faced criticism from both the industry and consumer advocates who believe they may not go far enough in combating redlining.
The CRA seeks to reduce lending disparities in non-White communities. A contentious point in the overhaul is the expansion of "assessment areas" to include lending beyond physical branches. Critics argue that this change may not have a significant impact, particularly with the rise of nonbank lenders that the CRA does not cover.
The new rule mandates large banks to disclose data on home mortgage loans by income, race and ethnicity in each assessment area, providing transparency on their lending practices in communities of colour.
However, the plan's complexity and cost have raised concerns among some regulators, including criticism of the USD 2 billion asset threshold for CRA coverage. The Consumer Bankers Association also expressed concerns about unintended impacts on consumers.
Overall, while the CRA updates aim to address redlining, some believe the CRA has never been a comprehensive solution to the problem. Additionally, regulators have introduced a proposal for banks with assets over USD 100 billion to assess their exposure to climate-related financial risks.