What the pause on CRA modernization means for compliance officers
Exploring the implications of the rescinded 2023 CRA rule, what reverting to the 1995 framework means for institutions, and why now is the time to reassess your CRA strategy, tools, and team structure.
The recent pause on CRA modernization has left many financial institutions in a state of uncertainty. Following the rescission of the 2023 CRA final rule and the return to the 1995 framework, compliance officers are once again navigating legacy regulations in a time of evolving community needs.
While the future of CRA reform remains unclear, this is only temporary. One message from Wolters Kluwer’s recent webinar, Unlocking the power of community development: Streamlining CRA compliance and boosting community impact, is clear: compliance leaders can use this time to sustain their momentum.
Back to the 1995 framework
The Community Reinvestment Act (CRA), enacted in 1977 and last substantially revised in 1995, is the operative rule of the land. The industry had anticipated sweeping modernization through the now-rescinded 2023 rule. Now, financial institutions must continue operating under the 1995 framework – a regulation designed in a pre-digital era for a very different financial landscape.
Jason Keller, Director of Market Strategy at Wolters Kluwer, explained in the webinar that, while the regulatory changes are paused, CRA expectations remain unchanged.
“We know that the legacy CRA requirements will continue to apply in the near [future],” Keller urged institutions to use this interim period to reinforce their CRA programs. “This is a time to look inward but this is also a time to look outward.”
Noting that the uncertainty is temporary, regulators’ expectations around community impact and compliance performance are ongoing.
Implications for CRA strategy and ratings
CRA ratings carry significant consequences.
As shown in the evaluations discussed in the webinar, 87 percent of institutions received a "Satisfactory" rating, and only one percent earned an “Outstanding” rating. Meanwhile, 63 institutions – more than one percent – received ratings of “Needs to Improve” or “Substantial Noncompliance.”
These ratings do more than assess compliance. They directly impact banks’ strategic initiatives such as branch openings, mergers, and acquisitions.
An effective CRA compliance program, especially in community development, can help institutions maintain satisfactory or higher ratings and avoid costly downgrades.
As Keller emphasizes, “CRA compliance doesn't happen without targeted measures of success and goal setting.”
A growing patchwork of state-level CRA requirements
Adding complexity to the compliance landscape is the rise of state-level CRA requirements. States like Connecticut, Illinois, Massachusetts, and New York have introduced or are considering their own rules. These state-by-state disparities can present a growing burden for compliance teams.
Institutions that operate across multiple jurisdictions must now monitor multiple regulatory environments simultaneously. The state-level evolution increases the importance of maintaining flexible, well-documented, and centralized CRA strategies to ensure readiness across jurisdictions.
The time to reassess your CRA compliance program is now
While the modernization pause could tempt some institutions to delay change, the webinar made a compelling case for the opposite.
Keller outlined a series of critical next steps for financial institutions:
- Reassess CRA compliance programs and long-term strategy
- Repurpose response plans developed for the 2023 modernization rule
- Define and articulate long-term CRA goals
- Stay informed and focused on the core CRA purpose: community development
This is a prime opportunity to re-center on the “why” of CRA and ensure compliance infrastructure is prepared for future modernization efforts whenever they may come.
Challenges in the current CRA compliance environment
Despite the best intentions to standardize processes, many institutions still rely on disparate, manual, or semi-automated processes to manage their CRA obligations. From data collection and validation to qualification and exam readiness, these processes often live in spreadsheets, across departments, or within outdated systems.
This inefficiency hinders an institution’s ability to proactively manage community development activities and effectively prepare for exams.
A purpose-built solution: Community Development Wiz®
Recognizing these challenges, Wolters Kluwer introduced Community Development Wiz®, a dedicated module within the Wiz platform designed to streamline community development compliance.
This solution, launching in Q4 2025, provides a centralized platform for institutions to:
- Capture and manage lending, investment, and service activities
- Assign purpose and measure responsiveness and impact
- Upload and manage documentation
- Use queue-based task management for lines of business
- Support exam readiness with automated analytics
- Report internally and externally with confidence
Community Development Wiz addresses the very gaps many institutions are struggling with—eliminating disconnected workflows and helping compliance officers shift from reactive to proactive.
As Lead Product Manager, Miral Patel, described, the tool helps “support qualification and documentation of activities” while preparing institutions for both current compliance needs and any future regulatory changes.
Staying the course: What’s next for 2025 and beyond?
While CRA modernization is on hold, the work of community development is not. This pause should be used as a strategic inflection point. Institutions can and should take this moment to strengthen their compliance infrastructure, realign their CRA strategies with long-term goals, and modernize outdated processes.
In doing so, they’ll not only be ready for the next chapter of CRA reform – they’ll be better equipped to drive meaningful, measurable impact in the communities they serve.
