Publication Date
August 2010Author(s)
Janneke RatcliffeThe 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.
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.