Episode 71: CRA Tips: CRA Services-What exactly does the provision of financial services mean?

Episode 71: CRA Tips: CRA Services-What exactly does the provision of financial services mean?

In the past, regulations narrowly defined the provision of financial services. To qualify a community development service, it has to have a primary purpose of community development, be offered on behalf of the bank, and must be related to the provision of financial services. Back then, this meant traditional banking, like creating a spreadsheet or something financial in nature. Here, we cover the updated definition of the provision of financial services to expand eligible community development service activities.

Interagency Questions and Answers Regarding Community Reinvestment:

The specific citation from the above linked resources referenced within this podcast episode is the following:

  • ll.12(i)–3: What are examples of community development services?

A3. Examples of community development services include, but are not limited to, the following:

  • Providing technical assistance on financial matters to nonprofit, tribal, or government organizations serving low and moderate-income housing or economic revitalization and development needs
  • Providing technical assistance on financial matters to small businesses or community development organizations, including organizations and individuals who apply for loans or grants under the Federal Home Loan Banks’ (FHLB) Affordable Housing Program
  • Lending employees to provide financial services for organizations facilitating affordable housing construction and rehabilitation or development of affordable housing
  • Providing credit counseling, homebuyer and home maintenance counseling, financial planning or other financial services education to promote community development and affordable housing, including credit counseling to assist low- or moderate-income borrowers in avoiding foreclosure on their homes
  • Establishing school savings programs or developing or teaching financial education or literacy curricula for low- or moderate-income individuals; and
  • Providing foreclosure prevention programs to low- or moderate-income homeowners who are facing foreclosure on their primary residence with the objective of providing affordable, sustainable, long-term loan modifications and restructurings.
[Specific examples related to the provision of financial services]

Examples of technical assistance activities that are related to the provision of financial services and that might be provided to community development organizations include:

  • serving on the board of directors
  • serving on a loan review committee
  • developing loan application and underwriting standards
  • developing loan-processing systems
  • developing secondary market vehicles or programs
  • assisting in marketing financial services, including development of advertising and promotions, publications, workshops and conferences
  • furnishing financial services training for staff and management
  • contributing accounting/ bookkeeping services
  • assisting in fund raising, including soliciting or arranging investments; and
  • providing services reflecting a financial institution’s employees’ areas of expertise at the institution, such as human resources, information technology, and legal services. Refer to Q&A §ll.24(a)—1 for information about how retail services are evaluated under the large institution service test.
Community Development Financial Institutions are also mentioned in this episode.
Community development financial institutions (CDFIs) are lenders with a mission to provide fair, responsible financing to rural, urban, Native, and other communities that mainstream finance might not traditionally reach.
CDFIs specialize in lending to individuals, organizations, and businesses in under-resourced communities, offering clients financial education, business coaching, and low-interest rate loans that increase economic potential and help build wealth.

CDFI lending leads to small businesses and homeownership, creates living wage jobs, supports the development of schools, grocery stores, and health care centers, finances climate change solutions, and so much more:

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