How CRA, Section 1071, and Fair Lending Intersect

With the introduction of Section 1071’s final rule earlier this year and the anticipation of the interagency update to CRA, compliance departments across the country are grappling with the regulatory frameworks that support fair lending and consumer protection.

Here’s an overview of how these three components, Section 1071, CRA, and Fair Lending, relate to each other:

Section 1071 Data Collection
Through the collection and reporting of data related to lending practices, specifically for small businesses and women-owned, minority-owned, and small disadvantaged businesses, Section 1071 aims to enhance access to credit for these underserved communities.

The CRA is designed to encourage financial institutions to meet the credit needs of their local communities, including low- and moderate-income neighborhoods. Regulated institutions have to demonstrate that they’re serving the credit needs of their communities, especially in areas where they operate branch offices.

Fair Lending
Fair Lending refers to the principle of equal treatment and nondiscrimination in lending practices. Under various federal laws, such as the Fair Housing Act and the Equal Credit Opportunity Act (ECOA), it is illegal for lenders to discriminate against individuals based on characteristics such as race, color, religion, national origin, sex, marital status, age, or receipt of public assistance.

Fair Lending regulations and enforcement actions seek to ensure that lenders provide fair and equal access to credit and do not engage in discriminatory practices.

How They Intersect:

The intersection of Section 1071, CRA, and Fair Lending lies in their shared goal of promoting fair access to credit and preventing discriminatory lending practices.

While CRA primarily focuses on encouraging banks to meet the credit needs of their communities, Fair Lending regulations ensure that the credit extended is done so without discrimination. Section 1071 complements these efforts by specifically targeting data collection and reporting on small business and lending practices, which helps identify potential disparities and enforce fair lending standards.

In summary, Section 1071, the CRA, and Fair Lending are interconnected as they all contribute to promoting fair access to credit, preventing discriminatory practices, and monitoring the lending activities of financial institutions. They provide a comprehensive framework to address the credit needs of underserved communities and promote transparency and equal treatment in lending.

If you’re looking for a more in-depth, tactical explanation of how these three components abut one another and the gaps between them, join our two-part webinar series in September.