The New CRA Rule and Purchased Small Business Loans

Scale Link enables banks to efficiently purchase small business microloans originated and serviced by Community Development Financial Institutions (CDFIs). These purchases enable banks to deepen their impact in the communities they serve and better meet their Community Reinvestment Act (CRA) obligations to disburse small business loans, especially to businesses with under $250,000 and under $1M gross annual revenue.?

The following review of the new CRA rule explains how loan purchases will be treated as well as important new methods and impacts to consider. The analysis below is for banks subject to the new Retail Lending Test. You’ll need to know whether your bank will be subject to the test either due to its size or by opting in to the new test

The federal financial regulators (OCC, FDIC, and FRB) finalized a new CRA rule that is effective on 4/1/24. However, both the definitions [__.12] and the Retail Lending Test [__.22] are not effective until 1/1/26. Data collection requirements under the new CRA rule are effective 1/1/26 with the first report due in 2027. Until 1/1/26, the definition and treatment of small business loans will be in accordance with the current Interagency CRA Rule.

Loan purchases are allowed under the current CRA rule [12 CFR ___.22(a)(2)]. Loan purchases are allowed under the new CRA rule [12 CFR ___.22(a)]. Pursuant to § __.21, the Retail Lending Test evaluates a bank’s record of helping to meet the credit needs of its entire community through the bank’s origination and purchase of home mortgage loans, multifamily loans, small business loans, and small farm loans.