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Question & Answer
Question: What is the purpose of using census tracts to define our assessment area? Why can't we just use a geographic or political boundary? If CRA compliance was supposed to be easier under the new rule, why is this burdensome census tract requirement in the rule?
Answer: Demographic data used by examiners and anyone else studying your bank's lending pattern are available only by census tract. Zip codes, rivers, and political boundaries are not necessarily aligned with census tracts. Because of this, the demographic data can only be matched to census tracts.
Burdensome as using census tracts may be, there are benefits that you can put forward. It is not just CRA-useful information that is available. In fact, lots of information can be obtained when using census tracts. Because so much demographic information is available, the work done in defining the bank's assessment area can also be used for other purposes - such as marketing. This could be a great way to curry favor with the marketing staff whose ad designs you usually ruin with small type!
Also, delineating the community may be the most important part of the process that the board should be involved in. Presenting the information and making the decision by census tract may help to involve board members. And if they are involved, they may remember talking about it when the examiner asks. So use this process to involve the board - and by involving them, train them.
Copyright © 1998 Compliance Action. Originally appeared in Compliance Action, Vol. 3, No. 10, 7/98
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