| Prior to the enactment of the Community Reinvestment Act (CRA), many depository institutions excluded low-income neighborhoods and persons of color from taking advantage of the institutions' lending services. The practice was known as "redlining," because it was quite easy to outline the areas at issue on maps. Activists and others engaged in efforts to bring about more equitable lending practices.
In 1977, Congress enacted the CRA. The law can be found at 12 U.S.C.S. ¤ 2901. In its declaration of purpose, Congress stated the following:
(a) The Congress finds that --
(1) regulated financial institutions are required by law to demonstrate that their deposit facilities serve the convenience and needs of the communities in which they are chartered to do business;
(2) the convenience and needs of communities include the need for credit services as well as deposit services; and
(3) regulated financial institutions have a continuing and affirmative obligation to help meet the credit needs of the local communities in which they are chartered.
(b) It is the purpose of this title to require each appropriate Federal financial supervisory agency to use its authority when examining financial institutions, to encourage such institutions to help meet the credit needs of local communities in which they are chartered consistent with the safe and sound operation of such institutions.
12 U.S.C.S. ¤ 2901.
Briefly stated, the CRA was enacted to encourage depository institutions to help meet the credit needs of the communities where they are located, including low-income communities, consistent with sound banking operations.
The CRA requires each covered institution to report certain information with regard to its business activities. The information is taken into account when a covered financial institution applies for deposit facilities, including transactions involving mergers and acquisitions. The statute defines the types of institutions required to comply with its mandate.
The following federal agencies conduct CRA examinations of covered institutions: The Board of Governors of the Federal Reserve System, The Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), and the Office of Thrift Supervision (OTS).
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