CRA, enacted in 1977, and its 1975 predecessor, the Home Mortgage Disclosure Act, were initially intended simply to collect data on where banks lend money. However, over the years HMDA and CRA reporting costs have increased. Further, CRA is used to delay or prevent banks acquiring or merging with other banks, closing branches, and the like when no illegal acts are involved. HMDA and CRA have yielded few benefits to consumers. Researchers using the best available data find very little discernible home-mortgage lending discrimination based on area, race, sex, or ethnic origin.
Today there is no indication that qualified borrowers are turned down.
Further, many large banks cream skim, that is, make loans to the better credit risks in central cities and to minorities to meet CRA requirements. This practice takes business from smaller, often minority-owned banks that have traditionally served those communities and clients. But more than two decades of its operation suggest that repealing rather than tightening the act would be the economically and socially responsible thing to do. The Cato Institute Please send comments to webmaster .