Overview of the CRA Revision

The withdrawal of the revised Community Reinvestment Act (CRA) by federal regulatory agencies marks a significant shift in banking regulations. Originally passed in 1977, the CRA was designed to combat redlining by requiring financial institutions to support community development and provide loans to low-income borrowers.

Details of the Revised Rule

The final rule issued in October 2023 represented the first substantial update to the CRA in nearly thirty years, aiming to modernize its approach. Notable features included:

• Incorporation of mobile and online banking into evaluations of banking products and services.
• Reduction in the variety of products analyzed under the retail lending test, focusing only on closed-end home loans, small-business loans, and small farm loans.

Legal Challenges and Withdrawal of the Rule

Following a lawsuit filed by industry groups opposing the changes, a federal judge in Texas issued a preliminary injunction, effectively halting the implementation of the revised rule. This legal intervention occurred shortly before the new regulations were set to take effect in April 2024, with many provisions intended to start on January 1, 2026.

Collaboration Among Federal Agencies

The agencies involved in this decision have stated their intention to continue collaborating in order to maintain a cohesive regulatory framework concerning the CRA. Their commitment reflects the ongoing importance of addressing lending practices that affect underserved communities.