Promissory Notes – Banking & Finance Insights, Volume 2, Issue 5 | Spilman Thomas & Battle, PLLC

Banking Law Rooted in Civil Rights Era Gets a 21st Century Update “The Community Reinvestment Act basically mandates that if you open a bank in a low-income neighborhood, you can’t just take that neighborhood’s deposits and lend them only to borrowers in richer, usually whiter, neighborhoods.” Why this is important: Banks are examined and scored based on the Community Reinvestment Act (“CRA”). CRA requires, among other things, a bank that opens a branch in a community to “invest” in that community. There are a number of ways for a bank to meet this goal, including lending in the community, sponsoring redevelopment and community improvements, and other actions. The equitable argument is that banks should not accept deposits from places where they are not otherwise willing to do business. The article explains that CRA does not apply to fintech businesses, which are not banks and operate largely on the internet. It also is difficult to determine easily where a fintech’s customers really are. Fintech players, because they are not “banks” and operate largely by internet, have escaped most bank-like regulation. This article discusses recent efforts to apply CRA standards and other applicable banking regulations to the fintech industry, such as focusing on areas where significant business is conducted and not just branch locations.

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