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US - CRA to be discussed. Below some issues regulatory agencies will need to look at.

Passed in 1977, the Community Reinvestment Act was landmark legislation requiring financial institutions to serve the lending, investment and financial service needs of their communities. Despite the broad power given to the federal regulators to implement CRA regulations, it has increasingly failed to oversee financial institutions in a manner that would protect neighborhoods from predatory lending and disinvestment.

"CRA once meant an end to overt redlining but, in recent years, banks have run amok. The regulators need to do their job better to be sure that neighborhoods have access to safe lending," said CRC Executive Director Alan Fisher (Californian Reinvestment Coalition). "These hearings are an opportunity for small businesses and overlooked neighborhoods to be heard."

The regulatory agencies need to look carefully at the following key issues in concert with the CRA Hearings:

  • Geographic Responsibility: CRA was written when all bank activity took place around a bank but today there are banks with one or few branches that do most of their business in other areas. These banks should be held responsible for CRA activity in those areas not just where their one branch is located.
  • Loan Product Quality Standards: Bank products must be fairly priced and meet the needs of low-income people and people of color not just the middle class. Regulators must ensure fair financial opportunities for all neighborhoods
  • Transparency: Small Business data must be collected immediately on minority-owned and women-owned businesses as will be rolled out in three to four years by the Dodd-Frank Act. Small businesses cannot get loan from banks where they have been customers for years and this should be transparent today. Information is also needed on smaller businesses to focus attention on entrepreneurism.
  • Subsidiary Lenders: All components of the financial corporation should be examined by the regulatory agencies for their CRA and banking activity.  In the past, corporations could choose not to have certain corporate entities examined by regulators and, too often, predatory practices took place in those subsidiaries.
  • Examination Ratings: Regulators should conduct more rigorous examinations and act upon evidence of discrimination.

ID: 45968
Publication date: 17/08/10

Created: 19/08/10. Last changed: 23/08/10.
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