By DeMario Greene, Director of Policy and Government Relations
For over the thirty-three-years, CCLF has been able to distinguish itself as an agent of community revitalization – not only through its innovative lending products but also through its work to support positive public policy proposals on the local, state, and federal levels. CCLF is currently working to educate key stakeholders about two very important opportunities to potentially transform Illinois and have some impact nationally, the Illinois state Community Reinvestment Act (IL CRA) and the creation of an Illinois state CDFI Fund.
Illinois CRA
The Illinois General Assembly (ILGA) passed the IL CRA which was signed into law by Governor Pritzker on March 23, 2021. This law, modeled after the federal Community Reinvestment Act (CRA), codified a mandate for state-chartered banks and financial institutions to equitably serve historically overlooked populations and ensure that they are meeting the needs of the communities in which they operate. CCLF, in tandem with several other community development-focused organizations led by Housing Action Illinois and the Woodstock Institute, formed the IL CRA Coalition (the Coalition) in order to lend our technical expertise to the conversation and real world understanding of how this law could impact low- and moderate-income populations, particularly given our deep experience with the federal CRA and the challenges it has had in addressing racial discrimination comprehensively.
Since its passage, the law has faced numerous challenges and is nearing the end of an extensive rulemaking process. Most recently, the rules for this legislation were approved by the ILGA Joint Committee on Administrative Rulemaking and are under review by the Illinois Department of Financial and Professional Regulation. A key provision calling for the IL CRA to be paired with a disparity study fell out of the current iteration of the proposed rules. This provision called for regulators to periodically conduct studies to assess whether those who fall under protected characteristics under the Illinois Human Rights Act which prohibits discrimination along the lines of race, national origin, gender, sexual orientation, marital status, and many other categories had equitable access to financial products and services. To protect this accountability measure, legislators introduced SB 3235, amending the IL CRA to include a disparity study in the financial institution examination process. This aligns with the Illinois Legislative Black Caucus’ intent in creating the IL CRA which was to set a national example on bias-conscious regulations that root out the institutionalized discrimination that prevent marginalized communities from thriving.
Illinois CDFI Fund
Over twenty years ago, Illinois-based CDFIs successfully worked with the ILGA to create the Illinois Investment and Development Authority (IIDA). This law, supported by then State Senator Barack Obama, was intended to create a state based CDFI Fund (IL CDFI Fund), modeled after the federal program which undergirds the vital work CDFIs do. This Authority went unfunded due to state financial constraints with the promise that it would be fully operationalized once the economy rebounded. With additional federal resources being brought to the state and multiple consecutive budget surpluses, it’s time for Illinois to make good on that promise. In the time sense the IIDA was authorized, several states have been able to operationalize state-based CDFI Funds that have bolstered the impact that CDFIs are able to make in chronically underinvested communities.
Thinking big, with our ability to leverage $8 dollars in private investment for every $1 dollar received in public funds, a hypothetical public investment of $100 million annually, for example, over the past two decades could have yielded a total investment of $18 billion for low- and moderate-income neighborhoods across the state. This support could have prevented Illinois from being rated the Least Racial Equality in the country, according to a study by WalletHub. A separate study by the Sustainable Development Solutions Network ranked Illinois 47th in overall Racial Equality. A 2020 study by the St. Louis Federal Reserve showed that, in Illinois, Black households earned $0.55 for every $1 that White households made, further exacerbating gaps in homeownership, entrepreneurship, and wealth-building. CDFIs have an extensive track record of expanding opportunities for marginalized communities to excel on all these fronts, but, with a need this great, it will take more to do more.
Change starts today, and it requires meaningful investment and thoughtful policy. By creating a regulatory system that forces banks to directly examine where they are falling short in terms of ensuring equitable access to financial product and services, it also shines a light on the neighborhoods, communities, and households that CDFIs are most adept at supporting and where efforts are should most deeply be embedded. With robust support from key stakeholders, Illinois could create a rare win-win scenario that benefits both communities and corporations, doing the right thing not just morally but for everyone’s long-term economic growth.