The legislation's failure to extend CRA to any institution or affiliate engaging in banking services has several consequences. It establishes in the financial service regulatory structure an automatic shrinkage of the CRA umbrella as traditional banking activities are increasingly offered in nonbank institutions. So, fewer and fewer institutions that engage in banklike activities will be examined for the way in which they serve their communities, including lower-income neighborhoods. The results of the growth of predatory lenders are already a disaster in some low-income neighborhoods. In Chicago, for example, there is clearly a dual market in mortgage refinance lending.
Predatory lenders are a subset of subprime lenders.
However, predatory activity is not the only problem. The failure to redraw the boundaries of CRA to recognize contemporary realities means that independent mortgage companies will not come under adequate scrutiny for predatory practices and that banks will be able to continue to conduct a substantial percentage of their mortgage activity outside CRA review. The failure to modernize CRA also has consequences for low-income families' access to retail banking services and consumer credit. Most states do not regulate check cashing outlets and payday loan stores, and virtually none regulate the other lenders. The consequences of the absence of regulated lenders and the presence of predatory firms in certain neighborhoods are very serious.