Mortgage Finance, Consumer Financial Services, Consumer Protections, Financial Services Industry, Regulation & Reform
Testimony | August 31, 2010

Community Reinvestment Act Regulations (written)

Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corp., Comptroller of the Currency and Office of Thrift Supervision
Janneke Ratcliffe

The review of Community Reinvestment Act regulation comes at a critical time, as our financial system is being rethought and communities and families try to rebuild. Today, as in 1977, the hope is that CRA can foster a more inclusive path to financial opportunity that strengthens all of our communities.

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Summary

View related oral testimony given by Janneke Ratcliffe at a public hearing on August 6, 2010

Your review of Community Reinvestment Act regulation comes at a critical time, as our financial system is being rethought and communities and families try to rebuild. Today, as in 1977, the hope is that CRA can foster a more inclusive path to financial opportunity that strengthens all of our communities.T

CRA encourages banks to meet the “need for credit services as well as deposit services” for the communities it serves in recognition that basic financial services are the gateway to opportunities, such as homeownership and entrepreneurship, that enable Americans to gain financial security and build wealth. From the ratings on CRA tests, it would appear that  banks are meeting the credit needs of their communities well.

However, a recent FDIC survey finds that quarter of U.S. households un- or underbanked, including 54% of black and 43% of Hispanic households. Nearly one in five lower-income households does not have a bank account at all. Further, between 35 and 70 million Americans lack sufficient credit history to determine a credit score.

We can only conclude that the service test must be measuring the wrong thing. It is time to find a new approach.

We offer two recommendations: First, better assessment tools. Second, better data.

The UNC Center for Community Capital conducts research and policy analysis on ways to make financial services work better for more people and communities.

 

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