So you work at a credit union…and you have to comply with the Community Reinvestment Act (CRA).
Small crowd, huh?
As of March 2026, a small number of states have implemented CRA-style requirements that apply to, or may extend to, state-chartered credit unions. These states are:
If this is you, chances are you aren’t quite sure how the Community Reinvestment Act works or how to track your credit union’s community development efforts. There aren’t many resources made specifically for you, after all.
Honestly, the CRA can be challenging, even for seasoned professionals who have been subject to the rule for years.
Here’s everything you need to know about the CRA and how it applies to credit unions in Illinois, Massachusetts, and New York.
What is the Community Reinvestment Act?
First things first…what is the Community Reinvestment Act (CRA)? Before the CRA, banks used to get away with “redlining” community members, or refusing to lend to them based on race or where they lived. Bankers saw these low-to-moderate income individuals as too risky, so they created maps with literal red lines around the communities they didn’t want to lend to. The people living in these areas had a very hard time qualifying for loans and learning about the financial services that should be available to them.
This redlining practice led to the Community Reinvestment Act of 1977. The CRA ensures that banks meet the credit needs of everyone in their communities, not just the wealthy or “less risky” individuals. Now all federally insured banks must reinvest capital by giving equal access to credit and other banking products while providing safe and sound loans, services, and investments. The key here is “safe and sound.” Banks aren’t forced to lend to just anyone who asks. That would defeat the purpose of a bank, wouldn’t it? The CRA rewards banks that help people living in low-to-moderate-income (LMI) communities, but doesn’t force banks to make bad investments or waste money.
Why don’t most credit unions have to comply with the CRA?
Until recently, the CRA has only ever applied to federally insured banks. This means that credit unions haven’t had to worry about the CRA.
Why not?
Well, one main reason the CRA was never enacted for credit unions is because of the way credit unions are structured. Credit unions are member-owned, not-for-profit cooperatives, so they are already designed to serve a specific group of people, rather than the general public. Historically, credit unions have been viewed as inherently community-focused and less likely to engage in systemic redlining.
This is a topic that has been hotly debated for years. Banks believe credit unions should be subject to the CRA because they compete for the same customers and have grown significantly. Credit unions argue that their structure and mission already fulfill community reinvestment goals, so they don’t need additional oversight.
Credit unions have so far avoided a federal rule requiring them to comply with the CRA. However, a few states have implemented their own versions of the CRA that do apply to state-chartered credit unions, requiring them to undergo evaluations similar to banks.
If your credit union is in Illinois, Massachusetts, or New York, then these new rules likely apply to you.
Note: Each state’s rule has a specific name (Illinois Community Reinvestment Act, Massachusetts Community Reinvestment Act, and New York Community Reinvestment Act). For the sake of simplicity, we are going to refer to all of these acts together, plus the federal CRA rule, as “CRA.” Key differences will be called out as needed.
How does the Community Reinvestment Act work for credit unions?
Knowing that your credit union has to comply with the CRA is all well and good, but what does that actually mean? Honestly, it’s a little complicated, especially since each of the three states has slightly different rules.
Typically every 2–3 years (depending on state, size, and risk evaluation), each credit union will have a “CRA exam.” These exams can take months, and in very basic terms, examiners look at the CU’s community development loans, investments, and services and give the credit union a rating. This rating is public, so anyone can look up their institution and see how it’s helping the community. Understandably, you want to score well.
There are four CRA ratings:
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Substantial Noncompliance
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Needs to Improve
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Satisfactory
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Outstanding
Scoring an Outstanding rating is kind of like winning a marathon. It happens, but it takes A LOT of work and months of preparation. Most of this preparation falls on the Compliance team.
Of course, not everyone wants to win, or even run, a marathon. Many banks and credit unions are happy with a Satisfactory, and that’s all they’re expected to get. But if an institution wants to go above and beyond and really show that they serve their community, they may chase that Outstanding rating.
That said, you should do your best to score at least a Satisfactory. Poor CRA ratings can impact regulatory approvals, such as mergers, expansions, or new branches. You don’t want to be caught on the wrong side of a rating.
The Compliance team’s role
Larger banks typically have a dedicated CRA Officer to oversee the institution’s CRA program and keep it on track. While some larger or more mature credit unions—particularly in states like Massachusetts and New York—may have similar roles, this position is still uncommon across most credit unions (especially in states where CRA requirements are newer, like Illinois).
Instead, a credit union’s CRA program is often managed within the Compliance team, sometimes in coordination with lending, operations, or community development staff. Whoever is responsible will take on a wide range of responsibilities, including:
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Identifying community development loans, services, and investments
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Performing a self-assessment and keeping the CRA program on track
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Managing all the data (and there’s A TON of data to manage)
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Reporting to stakeholders and the board of directors
And that’s just leading up to an exam. The Compliance team (or designated lead) will also work directly with examiners—responding to requests, pulling supporting documentation, and often spending hours tracking down specific data points or examples. After the exam, they review examiner findings, respond to any follow-up, and begin preparing for the next evaluation cycle.
Does credit union size matter during a CRA exam?
While banks have clearly defined asset tiers that determine which tests they undergo during a CRA exam, credit union evaluations tend to be less rigid.
Credit unions in Illinois, Massachusetts, and New York are still evaluated based on asset size and complexity, but these states generally use more flexible, risk-based frameworks rather than strict, defined categories such as “small,” “intermediate,” or “large.” As a result, expectations are often tailored to what is reasonable given the credit union’s footprint, capacity, and business model, rather than tied to fixed asset thresholds alone.
In other words, don’t worry too much about the size of your credit union. Focus more on what you can reasonably do with what you have.
What do examiners look for in a credit union CRA exam?
Banks are evaluated under clearly defined CRA “tests” tied to asset size, but credit union evaluations in states like Illinois, Massachusetts, and New York tend to be more flexible and less formally structured. Although asset size, complexity, and capacity still influence expectations, these states generally apply a more principles-based approach rather than rigid, universally defined testing categories.
Before diving into those areas, it’s important to understand how geography plays a role. Like banks, credit unions are evaluated within defined geographic areas—commonly referred to as “assessment areas.” These are typically based on where a credit union has branches or serves its members. Examiners evaluate performance within these areas, with a particular focus on how well the credit union is serving low- and moderate-income (LMI) communities.
Now, here are the areas all three states with credit union CRA rules evaluate:
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Lending
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Services
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Community Development (including investments and, where applicable, loans and services)
While these areas are conceptually similar to federal CRA tests, they are not always labeled or applied as distinct, formal “tests” in the same way they are for banks.
Lending
Examiners evaluate a credit union’s lending activity to determine how well it’s meeting the credit needs of its community, with particular emphasis on low- and moderate-income (LMI) individuals and areas.
This typically includes:
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Geographic distribution of loans (are loans being made in LMI areas?)
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Borrower distribution (are LMI borrowers being served?)
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Types of loans offered (e.g., mortgage, small business, consumer lending)
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Responsiveness to community needs
Lending is generally the most heavily weighted component of a credit union’s CRA evaluation across all three states.
Services
Evaluating a credit union’s services focuses on how accessible and responsive it is in delivering financial services to its community.
Examiners typically look at:
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Branch locations and accessibility (including presence in LMI areas)
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Delivery systems (online banking, mobile services, ATMs, etc.)
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Availability of products and services to underserved populations
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Community development services, which can include volunteer activities
Looking at a credit union’s services often means looking at its employee volunteer hours. However, volunteer hours only count when they:
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Are tied to financial expertise or services (e.g., financial literacy, board service for nonprofits, advising)
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Have a clear community development purpose (such as supporting affordable housing, economic development, or services for LMI individuals)
Community Development
Examiners also assess how a credit union supports its community through community development activities, which can include both financing and (in some cases) investments.
This may include:
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Community development loans (e.g., affordable housing, small business support)
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Qualified investments, where applicable (more common for larger institutions), such as:
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Investments in community development financial institutions (CDFIs)
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Support for affordable housing projects
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Grants or donations tied to community development purposes
For credit unions, especially smaller ones:
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There is often less emphasis on formal “investment portfolios” compared to banks
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More focus may be placed on community development lending and participation
Taken together, these evaluation areas reflect a consistent goal across all three states: ensuring credit unions are meaningfully serving their communities, particularly low- and moderate-income individuals and areas. While the structure may be less rigid than federal CRA exams for banks, the expectations are similar (just more flexible and tailored to each credit union’s size, capacity, and field of membership).
The CRA exam process for credit unions
Before the exam
There’s a lot of work that goes into preparing for a CRA exam. And like we mentioned above, most of this work falls on the CRA Officer or Compliance team.
Before the CRA exam, the CRA Officer or a member of the Compliance team should:
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Create a CRA strategy and action plan (optional, but helpful)
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Conduct a CRA self-assessment to see where the CRA program is (also optional, but VERY helpful)
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Mine for community development loans (i.e. go through every commercial loan looking for potential CRA credit)
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Collect and manage all the necessary data
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Gather all documentation and build reports for CRA examiners
Sound overwhelming? It can be. Preparing for a CRA exam takes a lot of time, especially if the team doesn’t have a good system in place for collecting and managing data.
During the exam
Whether the exam is on-site or online, your team will likely be very involved in the process. From weekly chats with examiners to defending the credit union’s CRA performance, it’s quite a busy time. If an exam is on-site, your team may even be responsible for reserving private conference rooms, coordinating parking and building access, and finding local menus to support lunch breaks.
After the exam
Once the exam is over, your team should immediately start preparing for the next one (after a much needed vacation or some PTO, of course).
To begin, examine your results. Whether you achieved a Satisfactory, Needs to Improve, or Outstanding rating, there’s always something to improve the next time around. Now is the time to reflect on your program’s performance and build a plan for the future.
If you have any questions about your rating or why you didn’t get credit for that impactful community initiative, you can reach out to your examiner and ask. Having a good relationship with your examiner is a critical part of building a lasting CRA program.
You should also revisit your CRA strategy, action plan, and self-assessment. Chances are your executive team or board of directors will want a report, and it’s a good idea to share these documents with them and pitch your plan for the future.
How to manage all this CRA data for credit unions
Believe it or not, many banks and credit unions use spreadsheets or outdated software to manage this entire process. Large institutions might have hundreds of CD loans, dozens of investments, and tons of service hours every year. And the person in charge has to capture a lot of data, like who the service impacts, who volunteered, why they believe it qualifies under the CRA, and so much more.
As you can imagine, this is a ton of work. And spreadsheets just don’t cut it anymore.
Kadince’s CRA Management software is built specifically for banks and credit unions managing CRA data. Kadince makes it easy to track, manage, and report everything needed for your next CRA exam, including loans, investments, and services.
If given the choice between archaic, difficult-to-use spreadsheets and easy, time-saving software, we know which one we’d pick.
To learn how Kadince can help your credit union manage CRA data, schedule a no pressure, 30-minute demo.
The future of credit union CRA requirements
So how will all of this look in the future? Will the federal CRA ever be updated to include credit unions? Will more states adopt their own CRA regulations?
Unfortunately, the answer to all those questions is “nobody knows.”
For now, most credit unions are lucky not to have to worry about the CRA. If you are at a CRA-regulated credit union (if you’ve read this far, we’re guessing you probably are), then you still have it a bit easier than most banks. However, there are a lot fewer resources and guides available to you.
Credit unions continue to grow, expand their fields of membership, and compete more directly with banks, especially in lending. That growth is one of the key reasons states like Illinois, Massachusetts, and New York have stepped in to apply CRA-style expectations.
Whether that trend continues will likely depend on a mix of regulatory priorities, political pressure, and how the industry evolves. It’s entirely possible more states will follow suit—or that federal policymakers revisit the question down the road—but any changes will likely happen gradually rather than all at once.
In the meantime, credit unions operating under CRA requirements have an opportunity to get ahead. Building strong processes, tracking the right data, and developing a thoughtful approach to community development now can make future exams much smoother—no matter how the regulatory landscape shifts.
Because even if the rules aren’t fully settled yet, one thing is clear: expectations around demonstrating community impact aren’t going away.
Frequently Asked Questions
Do credit unions have to comply with the CRA?
No, most credit unions do not have to comply with the federal Community Reinvestment Act (CRA). The federal CRA only applies to banks and thrifts. However, some states—such as Illinois, Massachusetts, and New York—have their own CRA-style laws that apply to state-chartered credit unions.
Which states require credit unions to follow CRA rules?
As of now, three states clearly apply CRA-style requirements to credit unions:
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Illinois
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Massachusetts
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New York
These laws apply to state-chartered credit unions, not federally chartered ones.
Why aren’t credit unions covered by the federal CRA?
Credit unions are not covered by the federal CRA because they are member-owned, not-for-profit institutions with a defined field of membership. Historically, lawmakers viewed them as already serving a specific community, reducing the need for CRA-style oversight.
What is a CRA exam for a credit union?
A CRA exam evaluates how well a credit union is meeting the credit needs of its community, particularly low- and moderate-income (LMI) individuals and areas. Examiners review lending, services, and community development activities and assign a public rating. Only credit unions in select states are required to undergo a CRA exam.
How often do credit unions have CRA exams?
CRA exams for credit unions typically occur every 2–3 years, but the exact timing depends on factors like asset size, risk profile, and previous exam ratings. Regulators use a risk-based schedule to determine a credit union’s next CRA exam, not a fixed timeline.
What do examiners look for in a credit union CRA exam?
Examiners generally evaluate:
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Lending activity (especially in LMI communities)
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Access to services (branches, digital banking, products)
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Community development activities (loans, services, and sometimes investments)
The goal is to determine how well the credit union serves its community.
How is CRA different for credit unions vs banks?
CRA requirements for credit unions are generally more flexible than for banks. Banks are evaluated under strict asset-based tiers and formal tests, while credit unions are typically assessed using a more risk-based, tailored approach based on size, capacity, and field of membership. Only credit unions in select states are subject to state CRA rules.
Do credit unions need a CRA Officer?
Most credit unions do not have a dedicated CRA Officer. Instead, CRA responsibilities are usually handled by the Compliance team, sometimes with support from lending or community development staff. Larger credit unions may have more formal roles.
What counts as community development for credit unions?
Community development activities may include:
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Affordable housing initiatives
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Small business lending
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Financial education programs
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Services benefiting low- and moderate-income individuals
Activities must have a clear community development purpose to receive CRA consideration.
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