Q&A: How Banks Can Stay Ahead of CRA Rule Changes

The recent overhaul of the Community Reinvestment Act (CRA) presents banks with new compliance challenges, particularly in how they manage lending in both traditional and online environments. To provide practical guidance on navigating these changes, we spoke with Linda Ezuka, founder of CRA Today, an organization dedicated to helping banks meet CRA compliance through education, resources, and community partnerships. In this Q&A, Ezuka shares strategies for banks to strengthen compliance, manage expanded geographic assessment areas, and stay ahead of regulatory shifts. 

New CRA rules introduce significant changes in how banks will be evaluated for compliance, particularly concerning retail lending assessment areas and community development tests. What strategies should banks prioritize to ensure they meet these new requirements without overextending their resources? 

To effectively prepare for the new CRA rule, banks should adopt a risk management approach focused on compliance and strategic enhancement. This involves strengthening existing programs and establishing new partnerships with community organizations to fill service gaps and earn CRA credit. Banks should also leverage legacy data to inform their strategies, including modeling assessment areas and calculating lending thresholds. A plan for the new rule should facilitate ongoing communication with key business lines, and forming a regulatory reform working group will ensure that all relevant positions are involved. Engaging executive management in strategic discussions will align bank goals with CRA compliance, positioning the institution for success in community investment efforts. 

The new CRA regulations reflect the rise of online and mobile banking by requiring evaluations beyond physical branches. How can banks effectively manage the compliance risks associated with these broader geographic assessment areas while maintaining focus on their traditional service areas? 

To stay aware of lending levels while prioritizing its physical branch footprint, a bank should adopt a dual-focus strategy, closely monitoring its in-and-out lending ratio. This includes analyzing the impact of both traditional and online lending services. As previously mentioned, familiarity with the new CRA framework is essential, utilizing legacy data to inform strategies. Banks must remain vigilant about lending activities nationwide, especially in areas where major product lines are offered without a physical branch. A single loan outside new rule assessment areas may necessitate an “outside retail lending area” (ORLA), triggering additional compliance requirements nationwide. Recognizing current performance gaps will better prepare banks for the new rule, given the similarities in geographic and borrower distribution tests. 

With ongoing legal challenges and the potential for further delays in the implementation of the CRA rules, how should banks approach their compliance planning to stay ahead of the curve, especially in light of the extended compliance timelines? 

As banks navigate the evolving regulatory landscape, it’s crucial to focus on the current CRA rule. Strengthening existing programs ensures compliance and helps identify current performance gaps. Forming partnerships with community organizations can enhance outreach and support CRA-aligned lending initiatives. Banks should prioritize data integrity and strengthen internal controls, implementing a robust framework that emphasizes the three lines of defense for effective risk management. Preparing for examinations through self-assessment and refining compliance management systems will build confidence in meeting regulatory expectations. Additionally, investing in comprehensive training for all staff will foster a culture of compliance, positioning banks for future success.