Righting the Wrongs of Redlining

The Community Reinvestment Act (CRA) is a civil rights law that creates a positive obligation for banks to invest in low- and moderate-income communities where they do business. Under the CRA, the public can submit comments to bank regulators on how well banks are living up to their CRA obligations. This public input becomes especially important during bank mergers as the banks seek approval for the merger from their regulators. A window of opportunity opens for Rise Economy to negotiate Community Benefit Agreements (CBAs) with banks during these merger periods.

A standout achievement last year was the advocacy and ensuing collaboration with First Citizens Bank following the collapse of Silicon Valley Bank. At risk was a multi-billion dollar CBA that Rise Economy and our partners had previously negotiated with the now defunct Silicon Valley Bank, with $9 billion of that commitment dedicated to California community needs. After much dialogue and community pressure, including a Daily Kos petition that garnered over 22,500 signatures, First Citizens Bank agreed to substantially adopt the Silicon Valley Bank CBA, essentially doubling First Citizens Bank’s community support in California.

Over the past six years, we have negotiated over $116 billion in community investments with a number of banks, including U.S. Bank, BMO Harris, Mechanics Bank, Flagstar Bank, Banc of California, Central Valley Community Bank and Umpqua Bank. The results include:

● Small Business Support: $26.2 billion aimed at enhancing small business lending in LMI
areas and for businesses earning under $1 million annually.
● Community Development: $25.8 billion invested in projects including $4.1 billion for
affordable housing development.
● Mortgage Lending: $44.45 billion allocated to homeownership opportunities for LMI and
BIPOC individuals.
● Philanthropy: $276 million in grants and contributions supporting diverse community
initiatives, including housing counseling and homeless prevention.

Included in these CBAs we’ve secured bank commitments to strengthen community land trusts, support nonprofits in property acquisition and rehabilitation, and to create Special Purpose Credit Programs (SPCPs), which enable lenders to develop targeted programs for individuals affected by lending discrimination, systemic racism, and redlining. These agreements also create incentives for banks to empower developers of color through capacity building and financing housing projects in neighborhoods of color, alongside investments in climate resilience and broadband access and adoption.

Reforming the Community Reinvestment Act

Every year, Rise Economy members engage with banks operating in California to evaluate their adherence to community commitments under the CRA. Last year, 156 community leaders from 118 organizations participated in at least one bank meeting to advocate for our campaigns,ensuring that community needs are recognized by the financial sector and banking regulators.

2023 marked the completion of the most significant updates to the CRA rules in nearly three decades. These changes, which came after an extensive regulatory review process and hundreds of public comments submitted by Rise Economy members, were meant to address many of the shortcomings of the prior rule in light of changes in the banking industry, such as the dominance of online banking.

While the new CRA rules introduced more stringent standards and enhanced transparency, they fell short of incorporating race and substantively addressing climate-related financing. Despite these shortcomings, Rise Economy was prepared to support the updates. However, the banking industry has initiated lawsuits to derail these changes, aiming to avoid the imposition of these stricter standards, which we believe would result in greater investment in BIPOC communities.

Rise Economy Asks:
Do Banks Care About Racial Justice?

For more than two decades, Rise Economy had urged bank regulators to implement a rule under the Dodd-Frank Wall Street Reform Act of 2008 that would require banks to collect and report race and gender data of their small business borrowers, as is currently done with home loans. In 2020, we even sued the Trump Administration for failure to develop the rule. That case resulted in an agreement by the Consumer Financial Protection Bureau to develop the rule, which it finalized in March of last year.

Small business, community, and civil rights groups applauded and lauded the new rule as a transformational moment that would invariably increase access to credit for women and BIPOC-owned small businesses, help enforce anti-discrimination laws, and reduce the racial, gender, and other wealth gaps. Banking and business groups responded by bringing three lawsuits to halt the new rule.

In response, Rise Economy, alongside 100 members and allies, addressed 44 bank CEOs with an open letter highlighting concerns over litigation and lobbying by banking trade organizations that run in direct opposition to our mission and public statements they have made in support of racial equity. Out of 44 letters, ten banks replied in writing, Capital One engaged in discussions, and Bank of America has offered to meet. Six responses fully addressed all of our queries, with only Beneficial State Bank and Amalgamated Bank affirmatively answering and providing insights, aligning closely with our views.

Learn more about the Rise Economy vision we believe in

california reinvestment coalition strategic plan