Federal banking regulators are attempting to update a policy that has, over time, not lived up to its design to make homeownership and wealth creation more accessible for African Americans. The plan is to get banks to comply with new rules that will break down the barriers to lending and end racial disparities.

For years, discriminatory lending practices have worked to impede Black people in America from achieving generational wealth, despite federal policy intended to end the practices and close the wealth gap.

In 1977, President Jimmy Carter signed the historic Community Reinvestment Act (CRA), intended to end racially discriminatory practices in real estate and lending, including race-based redlining – the practice of systematically preventing people from buying homes in certain areas based on their race, ethnicity or religion –  that the 1968 Fair Housing Act outlawed.

Yet, nearly five decades later, the practices are alive and well.

On Oct. 19, Attorney General Merrick Garland announced a $9 million federal settlement with Ameris Bank in Jacksonville, Fla. A DOJ investigation found that the bank denied loans to Black and Latino residents, The Washington Post reported.

It was the latest case in an ongoing federal initiative to eliminate race and ethnic-based lending discrimination. The Biden administration launched its  Combating Redlining Initiative in 2021. By the end of October, the federal investigator secured $107 million in restitution and penalties from multiple banking institutions nationwide.

Meanwhile, the CRA’s ineffectiveness has prompted federal regulators to overhaul lending rules. On Oct. 24, the Federal Reserve Board, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency unveiled a long-await update of CRA rules.

It was clear that the CRA was ineffective because the racial homeownership gap hadn’t budged for decades. The old rules, which regulators substantially revised in 1995, required banks to serve everyone fairly in the communities where the banks have branches. But today, a lot of banking happens online and with mobile phones. So, the fed introduced new evaluation tests based on loan activity rather than branch location.

Federal Reserve Chairman Jerome Powell said, “The final rule will better achieve the purposes of the law by encouraging banks to expand access to credit, investment, and banking services in low- and moderate-income communities, adapting to changes in the banking industry, such as mobile and online banking, providing greater clarity and consistency in the application of the CRA regulations, and tailoring to bank size and type.”

Banks have a January 2026 deadline to comply with most new provisions.

Goals of the updated CRA regulations

The federal regulating agencies  identified four key goals of the revamped CRA:

• Encourage banks to expand access to credit, investment, and banking services in low- and moderate-income (LMI) communities. The agencies will evaluate bank performance.
• Adapt to changes in the banking industry, including mobile and online banking. It establishes a framework to evaluate the digital delivery of banking products and services.
• Provide greater clarity and consistency in the application of the CRA regulations. The final rule adopts a new metrics-based approach to evaluating bank retail lending and community development financing, using benchmarks based on peer and demographic data.
• Tailor CRA evaluations and data collection to bank size and type. Regulators will continue to evaluate small banks under the existing framework.

Did regulators miss an opportunity?

Jesse Van Tol, president and CEO of the National Community Reinvestment Coalition, applauded the CRA revision, calling it “ long overdue and essential” in a statement.

“Today’s new rules expand CRA to reflect society’s broader understanding of the nature of economic injustice. Discrimination not only made non-White America poorer – it shortened lifespans, raised rates of serious disease and left communities more vulnerable to the mounting climate crisis. Banks will now be encouraged to invest in projects that address these aspects of American inequality as well,” the statement read.

However, NCRC found fault.

“It is a deep disappointment that these new final rules still fail to make the racial wealth equity goals of the law explicit, even as the agencies appear to have made great strides in fixing a broken system that permitted blatantly discriminatory banks to receive ‘Outstanding’ grades for atrocious performance,” the statement added.

The National Fair Housing Alliance appreciated the regulators’ efforts to make the much-needed overhaul. But like the NCRC, it also said the regulators came up short by failing to “tackle head-on the barriers to credit” people of color encounter.

“Although the regulators have a statutory obligation under the Fair Housing Act to promote fair housing, they failed to explicitly incorporate race into the CRA, which means that White communities, including low-income communities, will continue to have better access to fair and responsible mainstream financial services while communities of color will continue to be disproportionately locked out” NRHA Executive Vice President Nikitra Bailey stated.

Bailey urged banks to serve all communities fairly and not use the regulators’ failure “as an opportunity to retreat from their responsibilities.”

Racial homeownership gap

There’s a persistent racial disparity in who benefits from homeownership in the United States, according to the U.S. Treasury Department. By the second quarter of 2022, white homeownership was 75 percent compared to 44 percent for Black households.

“Like the overall racial wealth gaps, these gaps in homeownership rates have changed little over the last three decades. In fact, the Black-white gap in homeownership rates was the same in 2020 as it was in 1970, just two years after the passage of the Fair Housing Act of 1968, which sought to end racial discrimination in the housing market,” the Treasury Department stated.

What to do if you suspect discriminatory lending

The Consumer Financial Protection Bureau, a federal agency involved in fair lending, says discriminatory lending is often hidden or unintentional. But there are a few warning signs:

• Refusing you credit if you qualify for it
• Discouraging you from applying
• Offering you less favorable credit terms
• Closing your account

If you believe you’re a victim, submit a complaint with the CFPB online or call (855) 411-CFPB (2372). You’ll need the dates, amounts, and other details about your complaint before submitting.