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CRA and Financial Education

The Community Reinvestment Act (CRA) was enacted by Congress in 1977 to encourage financial institutions to help meet the credit needs of all communities they serve. Since CRA has its own examination procedures and results in a Public Evaluation, many banks employ CRA compliance professionals to make sure they will receive a Satisfactory or Outstanding CRA Public Evaluation rating. 

There are 3 exams, one for large banks, one for intermediate small banks and one for small banks. Large banks are tested on 3 areas: lending, service and investment.  Small intermediate banks (ISBs) –  are tested specifically on Community Development lending, service and investment. These banks could benefit most from the connection between financial literacy and CRA. 

During an ABA Telephone Briefing/Webcast on Financial Education on January 18, 2007, John C. Dugan, Comptroller of the Currency, made the following remarks:

"The OCC encourages bank participation in financial literacy initiatives. Participation in financial literacy programs may also receive positive consideration under the Community Reinvestment Act." 

Since the Federal Reserve and the FDIC have virtually identical rules, this statement applies to state chartered banks as well as nationally chartered banks. 
 
If your bank brings financial education to those who can be considered low-and-moderate income (LMI), bank examiners may look favorably on that activity. In addition, financial education activities that could be considered community development stand out to bank examiners. 

In order to receive CRA credit for financial education, it is especially important to stress how your bank's financial education leads to greater community development.  For example, hosting a homeownership seminar will lead to more members of the community who own property and hosting lessons about the dangers of payday lenders will lead to more members of the community opening secure bank accounts and qualifying for less expensive credit from banks. 

You may already receive CRA credit or goodwill in your community for your bank-supported employees' volunteerism with other non-profit organizations that serve the LMI residents and neighborhoods, but you may be able to put your employees' and coworkers' talents to even better use by providing appropriate financial education. 

Just as it makes sense for firefighters to teach fire safety, and police officers to teach DARE curriculum, bankers should teach financial education.  

Below are a few links that may provide more information on CRA. 

• http://www.ffiec.gov/cra/about.htm - This page includes information about CRA and exam procedures from the Federal Financial Institutions Examination Council, which works to standardize the examination procedures of the five regulatory agencies for financial institutions. 
• 
http://www.ffiec.gov/cra/pdf/isbank.pdf - Exam procedures for ISBs
• 
http://www.occ.gov/cdd/Fact_sheet_Financial_Literacy.pdf - The OCC's Financial Literacy Fact Sheet
• 
http://www.occ.treas.gov/ftp/advisory/2001-1.doc - OCC Advisory Letter on Financial Education
• 
• 
http://www.occ.gov/ftp/advisory/2001-1a.pdf - The OCC's Financial Literacy Resource Directory
• 
http://www.ffiec.gov/cra/qnadoc.htm - An Interagency Q&A on CRA. 

For more information on CRA, please contact our ABA staff expert Robert Rowe is at rrowe@aba.com or 800-BANKERS.