The Community Reinvestment Act: Progress Made, But the Journey to Banking Equity Continues

Today, as we reflect on the newly unveiled Community Reinvestment Act (CRA) regulations, it is essential to recognize the significance of this moment. This landmark legislation, first enacted in 1977, has been a critical tool in the fight against redlining and the promotion of equitable access to banking services for low- and moderate-income communities. The recent revisions, the most significant since 1995, mark a crucial step forward in modernizing the law to reflect the changing landscape of banking in the digital age.

Despite the laudable progress marked by these regulatory changes, there is a lingering sense of what more could have been accomplished in addressing racial equity in banking. Our nation’s struggle with racial disparities in home ownership and wealth accumulation remains a stark reality. While 75 percent of white Americans have a home to call their own, only 46 percent of Black Americans can say the same, and the average white household holds wealth almost eight times that of its Black counterpart.

The decision by regulators – including the Federal Reserve, the Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corporation (FDIC) – to mandate transparency by compelling large banks to disclose home mortgage loan data, segmented by borrower income, race, and ethnicity, while commendable, merely scratches the surface. By leveraging extensive HMDA data, one would anticipate a more profound commitment to not only transparency but also accountability. Yet, the disclosure, in its current form, lacks the bite to challenge the status quo. It does not encompass a thorough examination of lending practices to address redlining concerns, nor does it hold the banks accountable for potential disparities evident in the data. This could have been a pivotal moment to radically reshape the narrative for Black Americans in their pursuit of homeownership, but it feels as though we’ve stopped short of making that transformative leap toward racial equity.

Further, when it comes to amplifying the voice of those advocating for the disclosure of non-mortgage lending data rooted in race and ethnicity, like the CFPB’s Section 1071 data, the regulators opted for restraint. Their focus remained narrowly tethered to the transparency of a bank’s mortgage lending. The broader spectrum of lending, which has profound implications for Black communities, was left untouched. While the complexities associated with data access are acknowledged, waiting for every star to align before taking action seems a timid approach for agencies tasked with ensuring equity.

Also, the void left by overlooking race-focused lending metrics, geographical and borrower distribution standards, along with widespread support for the inclusion of race and ethnicity into the Retail Lending Test, feels like a missed beat. These elements held the potential to be our frontline tools in confronting and breaking down racial disparities from the ground up, yet this tentative approach does not resonate with the transformative steps we had hoped for.

Finally, it seems as though the regulators are missing a crucial piece of the puzzle by not including data on the racial and ethnic identities of those benefiting from community development activities. The regulators’ caution, prioritizing logistical concerns over potential transformative impacts, is misaligned when our times demand bold action. We might have just lost an opportunity to deeply assess if, and the extent to which, our efforts genuinely uplift those they are meant for and if they are making a real dent in narrowing the racial divide.

Instead, by incorporating explicit racial equity mandates into the CRA final rule, the regulators could have sent a powerful message, directly challenging the age-old lending biases that have persistently held Black Americans from the foundational pillars of wealth creation. True, the terrain is fraught with legal intricacies, but there are some struggles, no matter how intricate, where our commitment must not waver. Pushing for racial fairness and justice in banking is unmistakably one of them. And as the reverberations of these regulatory choices linger, we are left wondering: had we summoned the courage to go further, might we be nearing a moment where Black Americans are on a level playing field in their pursuit of homeownership and wealth?

The era of hesitating in the face of racial disparity is behind us; today, we are summoned to take decisive and fearless action. Let this moment serve as a catalyst for change, inspiring us to redouble our efforts in the pursuit of a more equitable society where the dream of wealth accumulation and financial security is within reach for all, regardless of their race or ethnicity.

“Racial equity in the banking sector is imperative. Beyond just fairness, it’s an urgent call for justice and a critical step toward economic empowerment for all. As we grapple with the intricacies of the revised CRA, the spirit of its original intent cannot wait; we must fervently challenge and expand what we believe is possible. The path to banking equity is immediate, and only with unwavering dedication and collective action will we establish a banking system that genuinely represents everyone.” – Lenwood V. Long, Sr., President & CEO of The Alliance.