Financial institutions: California Community Reinvestment Act.

Plain English Breakdown

The official summary does not provide specific details on penalties or consequences for financial institutions that receive poor ratings.

California Community Reinvestment Act

This law requires banks and credit unions to help low- and moderate-income communities by providing financial services, and it sets up a system for the Commissioner of Financial Protection and Innovation to assess their compliance every three years.

What This Bill Does

• Requires covered financial institutions to meet the financial needs of low- and moderate-income communities where they do business.
• Makes the Commissioner of Financial Protection and Innovation assess these institutions at least once every three years.
• Gives ratings from one to five based on how well financial institutions are helping their communities.
• Allows the commissioner to investigate covered financial institutions for compliance with the law.
• Establishes a fund within the State Treasury for administering this act.

Who It Names or Affects

• Financial institutions like banks and credit unions in California.
• Low- and moderate-income communities in California.

Terms To Know

Covered financial institution

A bank or credit union that must follow the rules of this act.

Community Reinvestment Act (CRA)

The new law requiring banks and credit unions to help low-income communities in California.

Limits and Unknowns

• It is not clear how many financial institutions will be affected by this act.
• The bill does not specify what happens if a bank or credit union gets a bad rating.
• There are no details on how the fund within the State Treasury will be used.

Official Summary Text

AB 801, as amended, Bonta.
Financial institutions: California Community Reinvestment Act.
Existing law establishes the Department of Financial Protection and Innovation, which is under the direction of the Commissioner of Financial Protection and Innovation. Existing law makes the department responsible for administering various laws relating to financial institutions, including banks and credit unions. Existing law, until January 1, 2030, establishes the Financial Empowerment Fund, and provides that moneys in the fund are continuously appropriated to the commissioner for allocation to fund financial education and financial empowerment programs and services for at-risk populations in California, as specified.
This bill would establish the California Community Reinvestment Act, and would require a covered financial institution, as defined, to have a continuing and affirmative obligation to meet the financial services needs of the
communities, including low- and moderate-income communities and communities of color, in which the covered financial institution conducts substantial business, as specified. The bill would require the commissioner to assess the record of each covered financial institution in satisfying this obligation no less than once every 3 years, as specified. After each assessment, the bill would require the commissioner to assign one of 5 possible ratings to describe how the covered financial institution is meeting its community financial services needs, and to prepare a specified written evaluation of the covered financial institution’s record of performance. The bill would authorize the commissioner to consider this record of performance when considering an application for, among other things, the establishment of a branch or the relocation of a main office. The bill would also prohibit a covered financial institution with certain ratings from receiving state funds for deposit or being awarded a state contract to
provide financial services.
This bill would also authorize the commissioner to conduct specified investigations into covered financial institutions for compliance with the act. The bill would also authorize the commissioner to examine, in consultation with state and federal regulators, covered financial institutions for their compliance with specified state and federal laws.
This bill would establish the Community Reinvestment Fund within the State Treasury, and would make moneys in the fund available, upon appropriation by the Legislature, to the commissioner for purposes of administering these provisions. The bill would authorize the commissioner to issue an administrative penalty of up to $100,000 to a covered financial institution that regularly fails to meet its obligations under the act, and would require those penalties to be deposited in the fund.

Current Bill Text

Download Bill PDF