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Publication Date

July 2010


Janneke Ratcliffe


View related written comments submitted by Janneke Ratcliffe on August 31, 2010

The Community Reinvestment Act 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.

Topics(s): Affordable Homeownership, Consumer Protections, Financial Inclusion, Financial Services Industry, Housing Policy, Mortgage Finance