Community Reinvestment ActWhat is the Community Reinvestment Act?
The Community Reinvestment Act was designed to make money available to underserved areas. Banks took deposits in low-income areas, but they did not make many loans in those areas. Congress passed the Community Reinvestment Act to encourage lending, home ownership, and business expansion. Evolution In the 1960’s and 1970’s, lawmakers noticed that banks were not offering favorable loans to low-income communities. Banks argued that the borrowers in those areas were higher risk borrowers who they did not want to serve, and that it was difficult to evaluate creditworthiness with traditional credit scoring tools. Lawmakers and activists argued that the banks were discriminating or ‘redlining‘. • How Credit Works The Community Reinvestment Act was passed so that banks would have an incentive to do more business in these previously
