Does the Community Reinvestment Act Improve Consumers’ Access to Credit

Conway, Jacob; Glaser, Jack; Plosser, Matthew

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Does the Community Reinvestment Act Improve Consumers’ Access to Credit

Abstract: We study the impact of the Community Reinvestment Act (CRA) on access to consumer credit since 1999 using an individual-level panel and three distinct identification strategies: a regression discontinuity design centered on a CRA-eligibility cutoff; a comparison of neighboring census blocks; and an event study of changes in eligibility. All three rule out a significant effect of the CRA on consumer borrowing. We show that this is in part explained by a shift in mortgages from nonbanks, which are free from CRA obligations, to banks in need of CRA-eligible mortgages. Our findings underscore the pitfalls of a circumscribed regulatory regime.

Keywords: Community Reinvestment Act (CRA); household finance; banks;

JEL Classification: G21; G28;