Promissory Notes – Banking & Finance Insights, Volume 2, Number 5 | Spilman Thomas & Battle, LLC

Banking law rooted in civil rights era gets 21st century update “The Community Reinvestment Act basically says that if you open a bank in a low-income neighborhood, you can’t just take deposits from that neighborhood and lend them only to borrowers in more affluent neighborhoods, usually whiter neighborhoods.” Why it matters: Banks are reviewed and rated based on the Community Reinvestment Act (“CRA”). The CRA requires, among other things, that a bank that opens a branch in a community “invests” in that community. A bank can accomplish this goal in several ways, including lending to the community, sponsoring community redevelopment and improvements, and other actions. The fair argument is that banks should not accept deposits from places where they are otherwise unwilling to do business. The article explains that the CRA does not apply to fintech companies, which are not banks and largely operate on the internet. It is also difficult to easily determine where the customers of a fintech really are. Fintech players, because they are not “banks” and largely operate through the internet, have escaped most banking-type regulations. This article discusses recent efforts to enforce CRA standards and other banking regulations applicable to the fintech industry, such as focusing on areas where significant business is conducted and not just branches.

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