In November, Opportunity Fund responded to a request for comment on a series of questions and potential changes to the Community Reinvestment Act (CRA) released by the Office of the Comptroller of the Currency (OCC). The proposed changes are meant to update and streamline the law’s regulatory and implementation framework.
Opportunity Fund strongly supports a robust and inclusive Community Reinvestment Act to drive investments and services in underserved communities. Our comments follow a national trend set forth by advocates and regulators about the importance of maintaining CRA’s ability to facilitate investments into low-and-moderate income (LMI) communities.
While we appreciate efforts to modernize the CRA, Opportunity Fund objects to proposals that would water down the legislation’s effectiveness in uplifting LMI communities. Notably, a single, quantitative metric system was proposed which would cut out community voices in the CRA process while simultaneously incentivizing banks to make fewer, large investments to reach a target investment goal. This would be in lieu of funding thoughtful services that identify and address the needs of marginalized communities.
The Community Reinvestment Act
The Community Reinvestment Act was originally passed in 1977 to address the issue of geographical, income-based, and/or racial discrimination in investments and services offered by banks and government agencies. The solution? Require banks to invest in low-income neighborhoods in order to be approved for future branch openings, mergers, and acquisitions.
Currently, CRA examinations consider a wide array of banking activity to arrive at a single CRA grade that qualifies a bank for a proposed opening, merger, or acquisition. The banking activity considered includes direct lending to individuals in LMI areas and investing in Community Development Financial Institutions (CDFIs), like Opportunity Fund. Regulators and banks alike are also required to consider the input of community groups during examinations and formations of prospective CRA investment plans.
Lasting Impact for LMI Communities
The effectiveness of CRA in driving these investments is truly remarkable. According to the National Community Reinvestment Coalition, CRA has spurred more than $6 trillion worth of investments in low-and-moderate income communities. Over the life of the organization, Opportunity Fund has received over $70 million in CRA-motivated investments from banks, which, in turn has allowed us to originate nearly $200 million in small business loans with more being lent out every day. Our organization has a dollar-for-dollar leverage ratio of about $3:$1 – meaning that for every dollar invested, three dollars are lent out in the community.
Furthermore, our research has shown that every dollar Opportunity Fund lends out to a small business generates approximately two dollars in additional annual economic activity in the form of downstream spending, tax revenues, and job creation. Through Opportunity Fund alone, CRA investments have spurred over $385 million in further annual economic activity in California and beyond.
The importance of a strong Community Reinvestment Act and its role in supporting LMI communities cannot be understated. The proposals put forth in the OCC draft would remove community input from the bank accountability process and ultimately encourage banks to make monolithic investments rather than collaborate with LMI communities to address their local needs.
A full draft of Opportunity Fund’s comments can be found here.