CRA Data Integrity – What it is, and why it matters

Data collection, maintenance, and reporting are important aspects of financial institution evaluations under the Community Reinvestment Act (CRA). Financial institutions collect, maintain, and depending on their size, report key data elements to the federal government related to its lending activities in meeting the credit needs of its community.

Your bank works hard to meet the credit needs of its small business and consumer clients. With new rounds of the SBA Paycheck Protection Program (PPP) and other loan programs deploying that are aimed at stabilizing our local communities, accuracy and compliance have never been more important. Don’t let the lack of data integrity tarnish your bank’s hard work and reputation during these challenging times.

Why does CRA data integrity matter?

The purpose of CRA data collection and reporting is to enable examiners and the public to evaluate whether a bank is helping to meet the credit needs of its communities through its small business, small farm loans, consumer and home mortgage lending as applicable.

Accurate data leads to accurate assessments of fair lending and CRA lending performance. CRA data is released once a year and is public in the aggregate format. Oftentimes, accurate data enables the bank to showcase its lending performance to many stakeholders, both internal and external to the bank. This includes executive management, the board of directors, and key lending areas of the bank. This also includes community-based organizations such as nonprofit organizations, local government, and philanthropic entities.

The bank is subject to reputational risk due to data errors that may lead to costly remediation and erode consumer confidence. Lack of data integrity delays CRA examinations and triggers costly scrubbing efforts, often with the support of outsourced and expensive consulting firms.

What are the three most common challenges?

As you know, ensuring data integrity is a never-ending pursuit. Core systems change, people switch positions, humans make mistakes, etc. We have found that these three areas trip up even the most solid CRA programs:

1. Determining which commercial loan transactions are reportable or which ones are not reportable (based on Call Report Schedule RC-C etc.) and then capturing reportable loan data fields accurately.
2. Correctly identifying community development loans.
3. Correctly identifying loan types based on size and definition tests.

What are the three most critical data elements?

All key data fields are important to your bank yet these three elements tend to pose the most regulatory risk to your bank and your CRA program.

GEOCODING
To “Geocode” (assign the correct Metropolitan Statistical Area/Metropolitan Division (MSA/MD), State, County, Census Tract combination for each reportable loan), the correct loan address must be identified, collected, and onboarded in the bank’s core system.

LOAN AMOUNT
The loan amount must be accurate which seems straight forward until you consider refinances, renewals, credit line increases and decreases, inconsistency with
rounding and human inputting errors.

GROSS ANNUAL REVENUE
Indicator of Gross Annual Revenues dependent on collecting accurate gross annual revenues (not net) and considering aggregate revenue of related entities.