The passage of the Community Reinvestment Act (CRA) in 1977 was a defining moment for fair lending practices in the United States. By encouraging banks to meet the credit needs of all segments of their local communities, including low- and moderate-income (LMI) neighborhoods, the CRA started the conversation about equitable access to financial services. The CRA’s impact is still felt today. If you work in the banking industry, you are already familiar with this. You likely encounter the challenges of CRA compliance regularly.
Lending specialists, compliance officers, and other banking professionals must weigh the CRA against new and changing regulations. For example, community data is a key component of the CRA; however, evolving privacy and cybersecurity regulations complicate matters. Banks must also balance the financial risks associated with CRA compliance while maintaining impeccable records. Fortunately, compliance technology for banks has advanced significantly since 1977. Today’s Community Reinvestment Act software streamlines compliance and helps banks better serve their communities. Here’s what you need to know.
The Need for Community Reinvestment Act Software
Although the financial services sector was among the first to adopt computers and other technology, CRA compliance required a lot of manual effort early on. Even with computers, banking professionals manually entered data and maintained filing cabinets full of paper. Collecting and analyzing community data was done in cumbersome spreadsheets.
Part of the reason for all this manual work is the CRA’s inherent flexibility. The act “encourages” banks to meet community needs rather than outright mandating them. Since each community is unique and LMI can mean different things depending on the location, the CRA has some inherent leeway. But regardless of location, the CRA does require banks to prove their compliance with community data.
Between the potentially massive amounts of data, the detailed task of accurately geocoding loans and deposits, and evolving regulatory interpretations, it is easy to see why manually managing CRA compliance can lead to problems. Beyond the considerable time and effort required, manual systems are prone to errors. A real need for Community Reinvestment Act software emerged, but lending compliance technology had to catch up. The industry needed CRA software to improve, so it could help ensure data integrity, perform complex and timely analyses, and generate comprehensive reports proving compliance.
The Key Features of CRA Software
As technology advanced throughout the 1980s and 1990s, databases and banking compliance reporting tools helped relieve some of the manual labor associated with CRA compliance. However, these systems often operated in silos and still required a fair bit of manual intervention. Fast-forward to today, sophisticated compliance software is a reality, and financial institutions have multiple options to choose from.
However, not all Community Reinvestment Act software offers the same set of capabilities. Here are the key features to look for in CRA software:
Automated Data Collection and Reporting
For effective regulatory compliance automation, software must aggregate all loan, deposit, and investment data relevant to CRA compliance. Look for the ability to accurately geocode addresses to census tracts, identify loans within specific assessment areas, and classify them according to regulatory standards. If CRA software can automate all this, it should also generate the required compliance reports. Review the systems’ reporting capabilities to ensure they can reduce manual effort (and the mistakes that come with human error). Youl will also want to look for a tool that helps you create PE tables for your self-assessment.
Seamless Integration With Other Banking Systems
CRA data shouldn’t exist in a silo. Modern, data-driven financial institutions will have relevant CRA data in other banking platforms like loan originating systems and general-purpose databases. The best software for financial compliance should offer seamless integration with your other systems. Integration ensures the right data flows into the CRA software, eliminating the need for manual re-keying while improving data integrity. Look for software with multiple integration options for maximum interoperability. Popular options include APIs, secure file transfers, or communication standards employed by your other systems.
The Benefits of Using ComplianceTech’s CRA Check™ Compliance Software
ComplianceTech offers a complete suite of fair lending solutions and CRA compliance software that sets industry standards. This includes the secure cloud-based tool CRA Check™ for creating, submitting, or reporting on a CRA loan application register (LAR). CRA Check™ validates CRA compliance while preparing users for their exams. Meanwhile, Fair Lending Magic™ is ComplianceTech’s web-based solution for fair lending risk analysis and compliance for virtually all types of loans. Like all ComplianceTech software, Fair Lending Magic™ enables effective compliance through highly accurate data collection and analysis.
ComplianceTech’s integrated compliance solutions automate and streamline the data aggregation and validation critical to CRA. ComplianceTech software solutions help ensure state and federal regulatory compliance by shifting the focus from tedious data management to strategic analysis. Just as each community is unique, ComplianceTech offers a range of software that can help you find a solution suitable for your bank or financial institution.
Automate CRA Compliance With ComplianceTech
Fair lending as we know it today started with the CRA. It was the start of government regulations requiring financial institutions to serve the unique needs of their surrounding communities. However, the challenges of managing vast amounts of data and achieving high levels of accuracy can make CRA compliance tedious without highly capable software.
That’s where ComplianceTech comes in. Our comprehensive suite of HMDA, CRA, and fair lending software is the key to streamlining compliance. To learn more about our compliance management systems, request a personalized demo of ComplianceTech software today.
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