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Understanding the Community Reinvestment Act (CRA) and Its Impact
Definition & Meaning
The Community Reinvestment Act (CRA) is a federal law enacted in 1977 that requires banks and savings associations to serve the credit needs of the communities in which they operate, particularly low- and moderate-income neighborhoods. The CRA aims to reduce discriminatory lending practices and ensure that all individuals have access to credit. Financial institutions are assessed by federal regulatory agencies to ensure compliance with the CRA, and this assessment influences decisions regarding new branch applications and mergers or acquisitions.
Table of content
Legal Use & context
The CRA is primarily relevant in the field of banking and finance law. It is used to evaluate how well financial institutions meet the credit needs of their communities, particularly for underserved populations. Legal practitioners may encounter the CRA in contexts involving:
Banking regulations
Compliance assessments
Mergers and acquisitions
Users can manage CRA-related matters using legal templates available through US Legal Forms, which can help in preparing necessary documents for compliance or applications.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: A local bank applies for a new branch in a low-income neighborhood. The regulatory agency reviews the bank's CRA compliance record to determine if it has adequately served the credit needs of that community.
Example 2: A large financial institution seeks to acquire a smaller bank. The CRA compliance history of both institutions will be evaluated to assess how the merger will impact lending in their respective communities. (hypothetical example)
Relevant laws & statutes
The primary statute governing this area is the Community Reinvestment Act itself, codified at 12 U.S.C. § 2901 et seq. Other relevant regulations may include those issued by the Office of the Comptroller of the Currency (OCC) and the Federal Reserve.
Comparison with related terms
Term
Description
Difference
Fair Housing Act
A federal law that prohibits discrimination in housing.
CRA focuses on lending practices, while the Fair Housing Act addresses housing discrimination.
Equal Credit Opportunity Act
A federal law that prohibits discrimination in credit transactions.
CRA encourages banks to serve communities, while ECOA focuses on individual credit discrimination.
Common misunderstandings
What to do if this term applies to you
If you are involved with a financial institution, ensure that your organization is compliant with CRA requirements. This may involve conducting a self-assessment of lending practices and community engagement. If you need assistance, consider using US Legal Forms' templates for compliance documentation. For complex issues, consulting a legal professional is advisable.
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