How to achieve Community Reinvestment Act (CRA) compliance

For financial institutions, complying with the Community Reinvestment Act (CRA) is an important obligation. However, navigating the complex and ever-changing banking industry can be a challenge, which is why this guide is designed to help institutions of all sizes achieve CRA compliance. 

Whether you are a large national bank or a smaller community lender, the information and strategies presented here can help you develop sustainable and effective CRA programs that meet the needs of your community and comply with regulatory expectations.

What is the Community Reinvestment Act (CRA)? 

The Community Reinvestment Act (CRA), a U.S. federal law enacted in 1977, requires banks and other financial institutions to meet the credit needs of the communities they serve, particularly in low and moderate-income areas. It was designed to promote fair lending practices and to encourage institutions to invest in their communities. 

Here’s how it works: Regulators conduct periodic examinations of a financial institution’s lending performance and community development efforts, typically every three to five years. They will then assign service credits to the bank, which add up to one of the following ratings: outstanding, satisfactory, needs to improve, or substantial noncompliance.

Why is it important to ensure CRA compliance? 

If your financial institution is looking to open new locations, merge with other banks, and fulfill overall expansion efforts, CRA compliance is key. An outstanding or satisfactory rating will help you instill confidence in key stakeholders, allowing you to pursue your purpose and make more of a positive impact in the communities you serve.

Best practices for achieving CRA compliance

If you're looking for a better way to achieve CRA compliance, follow these tips:

Track compliance activities

There are several activities that banks must track to meet legal obligations, including:

• Investments in community services such as affordable housing and childcare.
• Revitalization of distressed land or designated disaster areas.
• Promotion of economic development by providing financing to small businesses. 
• Initiatives that promote permanent job creation, retention, and improvement.
• Creating or improving access to workforce development, job training, and financial literacy programs. 

Manual tracking through physical forms and spreadsheets can be time-consuming and error-prone. To streamline the process, turn to an automated tracking system. 

With Bonterra Corporate Social Responsibility (formerly CyberGrants), you can easily track how many hours your employees have worked in low and middle-income communities alongside your company-wide community development programs. And because all of your efforts are tracked within one data warehouse, you can get a holistic view of your CRA activities at any time. 

Save valuable resources 

In addition to streamlining the tracking process, Corporate Social Responsibility can help your institution save valuable time when it comes to:  

• Grants management: Bonterra Corporate Social Responsibility’s Grants Management solution simplifies grantmaking for your business. With unmatched flexibility, we’ll help reduce administrative burdens while optimizing resources. 
• Employee giving: When employees can search for volunteer activities, log hours, donate, and request a match all within one platform, you’re less likely to miss out on opportunities to gain a higher CRA service rating. 
• In-market delegation: Give local branches the freedom to give back to their communities, with the flexibility to set giving parameters and automate approval processes, and complete reporting at the store, region, and company levels. 
• Disbursement: Integration with accounts payable systems automates disbursements while serving as the system of record for all payments related to your CSR programs. 
• Disaster recovery: Harness our highly agile disaster relief platform to quickly create targeted programs when unforeseen events impact the communities you serve. 

By saving time on administrative tasks associated with CRA compliance, you can redirect more resources toward impactful community investments and services, further strengthening your commitment to meeting the credit needs of your communities.

Alleviate reporting challenges 

Federal regulators require financial institutions to report on their performance using information like the dollar amount of CRA-qualifying loans, their geographic distribution, and the percentage of total deposits located in low-and moderate-income areas.

To ensure your reports are complete and up-to-date, use our comprehensive solution to: 

• Reduce administrative burden. Shorten the time spent on report configuration and manual manipulation with at-a-glance monitoring of throughput status, region, focus area, dollar amount threshold, and more. 
• Take control of compliance. Measure and track CRA compliance and funding metrics across all of your programs including grants, employee giving, and volunteerism—all in one place.
• Enhance your data. Utilize census and demographic data to better align program spending with community-based needs and to understand which programs or activities are supporting middle and low-income regions for CRA compliance purposes. 
• Measure and share your impact. Distribute high-quality visualizations of your data story with greater ease and demonstrate a holistic view of how your funding is making an impact at local and global levels. 

By reducing the regulatory burden associated with CRA compliance, your financial institution can focus more on meeting the credit needs of the communities you serve, which is the primary goal of the statute.

Ready to tackle CRA compliance? 

Maintaining CRA compliance is an ongoing process that requires close attention to detail and investment in the right tools. To get started, evaluate your lending and investment practices and turn a critical eye toward your tracking and reporting systems. Doing so will help you promote economic equality while meeting regulatory obligations.