New, more stringent regulations aimed at modernizing fair lending standards will soon come into effect.

U.S. regulators will commence evaluating banks based on the communities and geographic regions they serve through online lending.

These changes, set to be officially approved on Tuesday, mark the conclusion of a contentious multi-year endeavor.

The process had been delayed due to strong lobbying efforts by community groups and lenders, compounded by a change in presidential administrations, Reuters reported.

These revisions expand the geographic areas where lenders are obligated to provide loans and related services to low-income individuals, making it more challenging for banks to achieve top ratings in their assessments for compliance with the 1977 Community Reinvestment Act (CRA).

Originally conceived to combat redlining, CRA regulations hold significant importance in the overall supervision of banks.

Poor CRA ratings place lenders in a “penalty box,” restricting them from engaging in mergers and other transactions.

Written by staff