The new CRA: it’s not just about mortgages anymore

Congress passed the Community Reinvestment Act (CRA) in 1977 to address what regulators identified as banks’ history of restricting access to credit and services for residents of marginalized communities. The CRA requires regulators to encourage banks and other deposit institutions to meet the credit, access, and service needs of all communities where they do business or have a presence.

In 2023, the CRA was overhauled to increase the focus and widen the aperture of financial inclusion for LMI (low to moderate) income and underserved communities through expanded access to essential financial services. Through various provisions and amendments, the act seeks to uplift marginalized populations, bolster infrastructure and foster economic stability. The new regulations began going into effect in late March of 2024, others will take effect through 2027.

Benefits of the new mandates

The new CRA requirements call for a new era in community development, emphasizing the importance of financial inclusion for lower-income individuals. As these measures take root and flourish, the envisioned future is one of equitable financial access and empowered, thriving communities.

Enhanced economic mobility

People from lower-income designated areas will have new ways to save, invest and secure loans, fostering upward mobility and economic stability.

Improved financial inclusion

Equal access to financial resources can further mitigate the exclusionary practices that have long been prevalent in traditional banking.  

Community empowerment

Promoting sustainable development through increased economic activity and improved financial health can fortify not only individual people, but their communities as a whole.

Expectations of banks

The new CRA rules raise expectations of banks as catalysts for positive change within underserved communities. Banks will be called upon to:

Expand accessibility

The act calls on banks to expand banking services into areas that were previously underserved or overlooked by establishing physical branches and adding mobile banking units and internet-based services in regions where financial access has historically been limited.

Develop and promote products and services for the needs of marginalized groups

Banks are expected to develop and promote financial products specifically designed to cater to the unique requirements of lower-income people through innovative savings accounts, micro-loans and other tailored services with flexible terms and minimal barriers to entry.

Financial literacy programs

Banks will also be expected to implement financial literacy programs to equip lower-income people with the skills and knowledge to manage their finances effectively, fostering a culture of self-reliance and responsible financial practices.

ATMs: your primary tool for CRA compliance

The good news for banks is that some of the CRA’s new mandates can be fulfilled via existing and evolving self-service technologies that are widely adopted and understood by consumers: ATMs and ITMs (interactive teller machines). ATMs can contribute to the act's overarching goals by enhancing access to financial services, especially in underserved or economically disadvantaged communities. Here's how ATMs align with the principles of the Community Reinvestment Act:

Improved access to banking services

ATMs are a convenient and accessible way to get many banking transactions done without having to travel long distances. People can transact where they live, work, or shop. They can be used not only for withdrawals, but also for deposits, transfers and balance inquiries (where available). With additional options such as ITM technology, consumers can even videochat with a banker about more complex services—on a video screen right where they go to get cash. An ATM located at a retailer or other location can turn a banking desert into a financial lifeline for the people of a community. Surcharge-free ATM networks like Allpoint for example, can play a key role in helping to support the new CRA regulations for banks. More than 1 in 4 Allpoint ATMs are located in LMI designated census tracts and more than 1 in 3 transactions conducted by cardholders of Allpoint member issuers are supported by these sites.

Convenience and empowerment

By enabling individuals to carry out basic banking transactions at any time, ATMs empower users to take control of their finances. This convenience can be particularly beneficial for lower-income people who might have irregular working hours or face transportation challenges, allowing them greater flexibility and control over their money.

Improved financial inclusion for underserved communities

When ATMs are strategically placed in diverse locations, including rural and low-income urban areas, they increase access to financial services for populations that might otherwise face barriers. This also helps drive access to traditional banking services at brick-and-mortar branches, paving the way for further financial investment in these areas and contributing to community development.

This aligns with the Community Reinvestment Act's objective of reducing financial exclusion and ensuring that underserved communities have access to essential financial resources.

Tool for financial education

Some ATMs offer functionalities beyond simple transactions, such as displaying account balances or providing mini-statements. This can serve as a form of financial education, allowing users to regularly check and understand their financial status, which aligns with the act's emphasis on promoting financial literacy and empowerment.

As technology continues to evolve, leveraging ATMs and ITMs as tools for CRA compliance remains an integral component of efforts to create more equitable access to financial services for all individuals—regardless of their socioeconomic backgrounds.