Community Reinvestment Act
A Guide to How it Can Be Used by Community Organizations
WHAT IS CRA?: The Community Reinvestment Act (CRA) is a federal law that makes it illegal for a bank to turn you down simply because of the part of town that you live in (banks can no longer "red-line" poorer neighborhoods). CRA encourages banks to seek new and creative ways to meet the credit needs of the community. Banks that fail to do this often get in trouble with the federal regulators. CRA does not, however, require banks to make loans that are outside of the "confines of sound banking practices" (such as loans to people who have bad credit histories or who do not have enough income to pay the loan back.
HOW CAN IT HELP YOU: CRA can help nonprofits get things from a bank such as loans, grants, used furniture, etc. This if true even if though the bank might have already turned down your request. In submitting your request to the bank you should always try to somehow package it in the context of helping the bank to better "meet the credit needs of the low income community" (the wording of the CRA statute).
CRA give you leverage to "pursuade" a bank to "do the right thing". If a particular bank refuses to talk to you or refuses to give you what you are asking for you can write a letter to the bank's "public comment file" (with a copy being sent to the US Comptroller of the Currency and the Federal Reserve Board (click their links below for more information). Once you write such a letter the federal regulators will usually try to contact you to get more information. Writing such letters can potentially get a bank into CRA trouble. The regulators have the power to drop a banks CRA rating from "satisfactory" to "needs improvement" thus making life much more difficult for them. For this reason the bank will be under a lot of pressure to give you what you want (especially if your request is reasonable)
CONCLUSION: This, then, is how CRA can be used. There is no magic. You simply think of something you want, call your local bank president to make an appointment, and then ask for it. If the bank ignores your request or turns you down for no good reason you can send complaint letter to the federal regulators. CRA can help open the bank's door.
FOR MORE INFORMATION:
-The
Federal Financial Institutions Examination Council's CRA Website-The
Federal Reserve Board's CRA Website-The
Comptroller of the Currancy's CRA Website