Insights into the world of small business lending and development

Small Businesses Score Points in Bank Regulation Change

Since 1977, the Community Reinvestment Act has required U.S. banks to meet the credit needs of people living in the areas where they do business — particularly those with low and moderate incomes. Banks are graded on how well they meet that mandate, and their track records matter when it comes to getting federal approval of changes such as a merger with another institution, or the opening of another branch.

Yet the federal law never spelled out exactly what “credit needs” means. Instead, regulators have worked with banks and communities on the definition, leaving the former caught in the middle of a perpetual war between big banks and community advocates. You can guess the odds.

Last month, the federal government released updates to the CRA regulations. Community advocates scored some small victories. Many of the biggest questions remain largely untouched. Here’s a brief breakdown.

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