152 Promoting Consumer Protection and Community Development
Function
Promoting Consumer
Protection and
Community
Development
The Federal Reserve advances supervision,
community reinvestment, and research to
increase understanding of the impacts of financial
services policies and practices on consumers and
communities.
7
Consumer-Focused Supervision
and Examination ...............................................154
Administering Consumer Laws, Drafting Regulations ............164
Research and Analysis of Emerging Consumer Issues ............165
Community Economic Development Activities ..................167
e Federal Reserve System Purposes & Functions 153
T
he Federal Reserve is committed to ensuring that consumer and
community perspectives inform Federal Reserve policy, research, and
actions, with the mission of promoting a fair and transparent consumer
financial services marketplace and effective community development,
including for traditionally underserved and economically vulnerable
households and neighborhoods.
To fulfill this responsibility, the Federal Reserve performs a number
of functions to implement various consumer protection, fair lending,
fair housing, and community reinvestment laws and to improve un-
derstanding of the dynamics of the consumer financial marketplace,
including
Figure 7.1. The Federal Reserve works to ensure that the nancial institutions it supervises
comply with laws that protect consumers
Federal Reserve survey data show that nearly all American families are involved in the nancial services marketplace, whether
as bank account holders, credit card users, or borrowers. The Federal Reserve’s consumer-focused supervision and regulation,
research and analysis, and community engagement programs help ensure that consumer and community perspectives inform
supervisory and policy work.
Transaction
account*
Mortgage/
HELOC
Credit card
balance
Auto
loan
Education
loan
Other
loan
93.2
48.1
38.1
30.2
19.2
11.5
Percent of U.S. households having:
* Transaction account includes checking, savings, and money market deposit accounts; money market mutual funds; and call
or cash accounts at brokerages.
HELOC Home equity line of credit.
Source: 2013 Survey of Consumer Finances (available in the Economic Research & Data section of the Federal Reserve Board’s
website, www.federalreserve.gov).
154 Promoting Consumer Protection and Community Development
• formulating and carrying out consumer-focused supervision and
examination policy to ensure that financial institutions under its
jurisdiction comply with applicable consumer protection laws and
regulations and meet the requirements of community reinvestment
laws and regulations;
• conducting rigorous research, analysis, and data collection to iden-
tify emerging consumer financial issues and assess their implications
for economic and supervisory policy;
• engaging, convening, and informing key stakeholders to identify
emerging issues and policies and practices to advance effective com-
munity reinvestment and consumer protection; and
• writing and reviewing regulations that implement consumer protec-
tion and community reinvestment laws.
Consumer-Focused Supervision
and Examination
Various consumer protection, fair lending, fair housing, and community
reinvestment laws apply to how financial institutions interact with their
customers and their communities. A primary Federal Reserve responsi-
bility to consumers is to ensure that the financial institutions under its
jurisdiction comply with applicable laws and regulations established by
Congress and the federal regulatory agencies.
Who the Federal Reserve Supervises for
Consumer Protection Laws and Regulations
The Federal Reserve supervises state member banks for compliance
with consumer- and community-oriented laws (for a full discussion
of state member banks, see section 5, “Supervising and Regulating
Financial Institutions and Activities,” on page 72). The Federal Reserve
evaluates
e Federal Reserve System Purposes & Functions 155
• performance under the Community Reinvestment Act (CRA) for all
state member banks, regardless of size;
• compliance by all state member banks, regardless of size, and their
affiliates with the Fair Housing Act, the Servicemembers Civil Relief
Act, the National Flood Insurance Act, prohibitions on unfair or de-
ceptive acts or practices (UDAP) under the Federal Trade Commission
Act, and certain other federal consumer financial protection laws
not specifically under the Consumer Financial Protection Bureau’s
authority; and
• compliance by state member banks with total assets of $10 billion
or less with all federal consumer financial protection laws and regu-
lations. (See figure 7.2.)
In addition, the Federal Reserve serves as the consolidated supervisor
for all bank holding companies and ensures that consumer compliance
risk is appropriately incorporated into a holding company’s consoli-
dated supervision rating. The Federal Reserve has additional supervisory
responsibility as the federal supervisor for savings and loan holding
companies and the consolidated supervisor for foreign banking organi-
zations and nonbank financial companies designated by the Financial
Stability Oversight Council for supervision by the Federal Reserve under
the Dodd-Frank Wall Street Reform and Consumer Protection Act. (For
more details on entities the Federal Reserve supervises, see section 5,
“Supervising and Regulating Financial Institutions and Activities,” on
page 72.)
How the Federal Reserve Supervises for
Consumer Protection Laws and Regulations
The Federal Reserve Board of Governors, and the 12 Reserve Banks un-
der delegated authority, have responsibilities for consumer compliance
supervision of organizations under the Federal Reserve’s jurisdiction.
The Board develops consumer compliance supervisory policies and
identifies emerging issues; provides rigorous examiner training; and
assists with the enforcement of fair lending, UDAP, and flood insurance
156 Promoting Consumer Protection and Community Development
violations. Further, the Board evaluates applications involving bank or
thrift holding companies or state member banks that present CRA or
consumer compliance issues, or that receive adverse comments from
external parties. The Board also works with other agencies to promote
consistency in examination principles, standards, and processes. The
Board’s Division of Consumer and Community Affairs (DCCA) provides
support to the Board in its consumer-focused supervisory activities.
A Regional Approach to Supervision
The Federal Reserve employs a regionalized approach to supervision.
The Board has delegated its examination authority to the 12 Reserve
Banks, which maintain consumer compliance supervisory programs
that evaluate institutions for their level of compliance with applicable
consumer protection laws, using policies set by the Board. Each Reserve
Bank has a staff of examiners who conduct periodic compliance exami-
nations at financial institutions under the Federal Reserve’s supervisory
authority, including state member banks and bank holding companies.
Consumer compliance examiners review the policies and practices that
pertain to consumer products and services offered at each of these
institutions. The Board oversees these Reserve Bank programs and rou-
tinely evaluates their effectiveness.
The network of Reserve Banks across the United States is integral to the
implementation of the Federal Reserve’s supervisory policy and helps
inform the Board’s understanding of consumer financial services trends
and issues that may be specific to some regions of the country.
Insights and examination findings from the Reserve Banks support the
Federal Reserve’s efforts to ensure that banking institutions effectively
serve consumers and communities and treat consumers fairly in their
credit and financial transactions.
Risk-Focused Consumer Compliance Supervision
The Federal Reserve applies a risk-focused approach to consumer
compliance supervision, focusing most intensely on those areas involv-
ing the greatest compliance risk. This approach is designed to promote
e Federal Reserve System Purposes & Functions 157
strong compliance risk management practices at financial institutions
and to enhance the efficacy of the Federal Reserve’s supervision pro-
gram while managing regulatory burden on many community banking
organizations.
Under the Federal Reserve’s risk-focused consumer compliance pro-
gram for community banks, consumer compliance examiners follow
procedures for assessing an individual financial institution’s risk pro-
file, including its consumer compliance culture and how effectively it
identifies and manages consumer compliance risk, to determine the
scope and resources needed when conducting an examination. The
risk-focused examination program also incorporates ongoing supervi-
sion to help identify and, if necessary, address significant changes in
the institution’s compliance risk management program or in the level of
consumer compliance risk present, as well as to ensure that supervisory
information is up to date.
The Federal Reserve also maintains a risk-focused program for assessing
consumer compliance risk at bank holding companies in the System, to
ensure that consumer compliance risk is effectively integrated into the
holding company rating.
Supervisory Policies and Guidance
The Federal Reserve communicates significant consumer-related policy
and procedural matters through Consumer Affairs (CA) supervisory let-
ters. The Federal Reserve often works closely with other supervisors in
crafting policy statements and guidance. CA letters can address a wide
range of topics, such as foreclosures, privacy of consumer financial
information, special legal protections for service members’ credit trans-
actions, and examination procedures for various consumer protection
laws and regulations and the CRA.
Interagency Initiatives
Through its participation on the Federal Financial Institutions Examina-
tion Council (FFIEC), the Federal Reserve collaborates with other federal
and state banking agencies on consumer financial supervisory guid-
Consumer Affairs (CA)
letters
To see the wide range of
consumer issues addressed
by the Federal Reserve
through CA letters, visit
the Banking Information
& Regulation section,
subsection Supervision,
of the Board’s website at
www.federalreserve.gov/
bankinforeg/caletters/
caletters.htm.
158 Promoting Consumer Protection and Community Development
Figure 7.2. Federal consumer nancial protection laws and regulations applicable to banks
Financial institutions must comply with a variety of laws and regulations that protect consumers. The Federal Reserve Banks,
using policies set by the Board of Governors, maintain consumer compliance supervisory programs that evaluate institutions
for their level of compliance with applicable consumer protection laws.
General banking
Federal Trade Commission Act Prohibits unfair or deceptive acts or practices in any aspect of banking
transactions.
Gramm-Leach-Bliley Act (title V,
subpart A), Disclosure of Nonpub-
lic Personal Information*
Describes the conditions under which a financial institution may disclose
nonpublic personal information about consumers to nonaffiliated third
parties, provides a method for consumers to opt out of information shar-
ing with nonaffiliated third parties, and requires a financial institution
to notify consumers about its privacy policies and practices.
Depository accounts
Electronic Fund Transfer Act/
Regulation E*
Requires disclosure of the terms and conditions of electronic fund trans-
fers. Protects consumers against unauthorized transfers and establishes
procedures for resolving errors and disputes.
Expedited Funds Availability Act/
Regulation CC
Limits hold periods on deposits made to depository institutions and
requires appropriate consumer disclosures.
Truth in Savings Act /Regulation
DD*
Requires uniform disclosure of terms and conditions regarding interest
rates and fees associated with deposit accounts. Prohibits misleading and
inaccurate advertisements.
Credit/general lending
Truth in Lending Act/Regulation Z* Requires lenders to clearly disclose lending terms and costs to borrow-
ers, and incorporates the provisions of the Credit Card Accountability
Responsibility and Disclosure Act, Fair Credit Billing Act, Fair Credit and
Charge Card Disclosure Act, Home Equity Loan Consumer Protection Act,
and Home Ownership and Equity Protection Act.
Fair Credit Reporting Act* Protects consumers from unfair credit reporting practices and requires
credit-reporting agencies to allow credit applicants to correct inaccurate
credit reports.
Equal Credit Opportunity Act/
Regulation B*
Prohibits creditors from discriminating on the basis of race, color, nation-
al origin, religion, sex, marital status, age, receipt of public assistance,
and exercise of rights under the Consumer Credit Protection Act.
Community Reinvestment Act/
Regulation BB
Encourages financial institutions to help meet the credit needs of their
entire communities, including low- and moderate-income neighborhoods.
e Federal Reserve System Purposes & Functions 159
Disclosure and Reporting of CRA-
Related Agreements/Regulation G
Requires banks and their affiliates and other parties to make public
certain agreements that are in fulfillment of the Community Reinvest-
ment Act, and to file annual reports concerning the agreements with the
appropriate agency.
Fair and Accurate Credit
Transaction Act*
Amends the Fair Credit Reporting Act. Enhances consumers’ ability to
combat identity theft, increases the accuracy of consumer reports, allows
consumers to exercise greater control over the type and amount of mar-
keting solicitations they receive, restricts the use and disclosure of sensi-
tive medical information, and establishes uniform national standards in
the regulation of consumer reporting.
Servicemembers Civil Relief Act
and Military Lending Act
Provides members of the military certain financial protections while on
active duty.
Mortgage lending
Fair Housing Act Prohibits discrimination in the sale, rental, and financing of dwellings
and housing-related transactions on the basis of race, color, national
origin, religion, sex, handicap, or familial status.
Real Estate Settlement Procedures
Act/Regulation X*
Requires that the nature and costs of real estate settlements be disclosed
to borrowers. Also protects borrowers against abusive practices, such as
kickbacks, and regulates the use of escrow accounts.
Home Mortgage Disclosure Act/
Regulation C*
Requires mortgage lenders to annually disclose to the public data on the
geographic distribution of applications and loans for originations, pur-
chases, home-improvement, and refinancings. Requires lenders to report
data on the ethnicity, race, sex, income of applicants and borrowers, and
other data. Also directs the Federal Financial Institutions Examination
Council, of which the Federal Reserve is a member, to make summaries
of the data available to the public.
Other financial topics
Flood Disaster Protection Act/
Regulation H
Requires flood insurance in connection with loans secured by property
located in a flood hazard area designated under the National Flood
Insurance Program.
Consumer Leasing Act/
Regulation M*
Requires disclosure of information about the costs and terms of consum-
er leases for vehicles and other personal property.
* The Federal Reserve System does not examine for these laws and regulations for depository institutions with total assets in
excess of $10 billion.
160 Promoting Consumer Protection and Community Development
ance. The FFIEC works to develop uniform principles, standards, and
report forms for the federal examinations of financial institutions. These
efforts promote the goal of supervisory consistency and uniformity
across the banking industry.
The Board’s FFIEC representative is advised by DCCA staff regarding
policy, procedures, and guidance related to consumer compliance
supervision. For more information on interagency supervisory initiatives,
see “Oversight Councils” on page 81.
How the Federal Reserve Enforces
Consumer Protection Laws and Rules
After a consumer compliance examination, examiners issue a confi-
dential report of examination, which includes a consumer compliance
program rating that reflects the institution’s performance with regard to
consumer compliance. When an examination reveals that an institution’s
policies or practices do not comply with consumer protection rules and
regulations, examiners cite violations in the report of examination and
require management to correct the violations and address any program
deficiencies. The Federal Reserve also has additional supervisory tools to
ensure that bank management addresses consumer compliance pro-
gram weaknesses, including informal and formal enforcement actions.
Formal enforcement actions include
• executing a written agreement between the Federal Reserve and
the financial institution’s board of directors or its management that
requires the institution to take specified corrective action;
• issuing cease-and-desist orders to halt practices in violation;
• assessing civil money penalties, when appropriate, depending on
the nature, severity, and degree of harm to consumers as a result of
deficient practices; and
• ordering remedies or restitution to consumers affected by an institu-
tion’s violations.
e Federal Reserve System Purposes & Functions 161
Evaluating Performance under the
Community Reinvestment Act
The Community Reinvestment Act encouraged depository institutions—
commercial banks and savings institutions—to help meet the credit
needs of their local communities, including low- and moderate-income
neighborhoods, consistent with safe and sound operations. The CRA
requires the Federal Reserve to evaluate each state member bank’s
CRA performance and assign one of four CRA ratings—Outstanding,
Satisfactory, Needs to Improve, or Substantial Noncompliance. The CRA
rating and conclusions, as well as the facts, data, and analysis that sup-
port the bank’s rating, are summarized in a publicly available perfor-
mance evaluation.
CRA examiners assess a bank’s performance using examination proce-
dures tailored to the bank’s size and the type of business it does. Perfor-
mance is evaluated in the context of the institution and the communities
within which it operates. That means examiners consider information
about the bank’s business strategy, product offerings, capacity, and con-
Box 7.1. Making Compliance with Consumer Laws a Priority
The Federal Reserve’s consumer compli-
ance supervision program is founded on
the expectation that consumer compli-
ance risk management is an integral
part of an institution’s corporate-wide
risk management.
A key goal is ensuring that each institu-
tion is in full compliance with federal
consumer protection laws and regula-
tions and has processes and programs
in place to keep up with new or revised
compliance requirements that may arise
as laws, regulations, and bank products
and services change. Examiners look
for a number of indicators of an
institution’s management of consumer
compliance risk:
• Board of directors and senior man-
agement oversight. Directors have
ultimate responsibility for the risk
taken by their institutions. Examiners
seek to ensure that senior manage-
ment is implementing strategies that
effectively identify and control for
consumer compliance risk.
• Policies and procedures. Examin-
ers seek to ensure that an effective
compliance program is in place with
documented policies, procedures, and
processes for monitoring and control-
ling compliance risks.
• Risk monitoring. Examiners seek
to ensure that information manage-
ment systems provide timely reports
to management on an institution’s
financial condition, operating perfor-
mance, and risk exposure.
• Internal controls. Examiners seek to
ensure that an institution’s internal
control structure allows it to effec-
tively manage its consumer compli-
ance risk, and creates effective lines
of authority and responsibility.
• Training. Examiners seek to ensure
that an institution provides its person-
nel with training regarding rules,
regulations, policies, and procedures
that impact the institution’s business
lines.
162 Promoting Consumer Protection and Community Development
straints, as well as the economic conditions, lending, investment, and
service needs and opportunities in the bank’s communities.
The public can also play a role in the CRA examination process by offer-
ing comments on an institution’s CRA performance, which the financial
institution must make accessible to the public. Examiners review these
comments and consider them when evaluating a bank’s overall CRA
performance.
An institution’s CRA rating and comments from the public are also
considered when the institution applies to open additional branches or
to engage in a merger or acquisition. The public has the opportunity
to submit written comments on an application. These comments are
considered by the Board when it evaluates the application.
Responding to Consumer Feedback
In addition to on-site examiner reviews of financial institutions, Federal
Reserve staff identify and investigate possible violations of consumer
protection laws through the Federal Reserve System’s consumer
complaint and consumer inquiry programs. Through these programs,
staff answer consumers’ questions, explain consumer rights under
federal law, investigate complaints against entities supervised by the
Federal Reserve, and refer complaints about other entities to the
appropriate agency. Consumer complaints are a critical component of
the risk-focused supervisory program. The Federal Reserve uses data on
consumer complaint activity in its supervisory processes when monitor-
ing financial institutions, scoping and conducting examinations, and
analyzing applications. Information about consumer complaints is also
reported in the Federal Reserve Board’s Annual Report to Congress
(available at www.federalreserve.gov).
Handling Complaints
The Federal Reserve has uniform policies and procedures for investigat-
ing and responding to consumer complaints, which are implemented
by staff at the 12 Federal Reserve Banks and the Federal Reserve Con-
Public comments on
CRA performance
Public feedback about a
depository institution’s
record in meeting the credit
needs of its community
helps inform the Federal
Reserve’s overall evaluation
of that institution’s compli-
ance with the Community
Reinvestment Act (CRA) and
its decisions about a bank’s
application to open more
branches or complete a
merger or acquisition. For
information on submitting
comments about a bank’s
CRA performance, see
www.federalreserve.gov/
communitydev/cra_about.
htm. For information on
submitting comments on
banking applications, visit
www.federalreserve.gov/
bankinforeg/afi/cra.htm.
e Federal Reserve System Purposes & Functions 163
sumer Help (FRCH) Center. The FRCH is a centralized consumer com-
plaint and inquiry processing center, which allows consumers to contact
the Federal Reserve online or by telephone, fax, mail, or e-mail.
When a consumer files a complaint with the FRCH, the first step is to
determine which Reserve Bank or other banking agency has responsibil-
ity for investigating that complaint. If the complaint involves an entity
that is not supervised by the Federal Reserve, the FRCH forwards the
complaint to the appropriate agency and then tells the consumer how
to contact that agency. If a complaint involves an institution supervised
by the Federal Reserve System, the FRCH forwards it to the Reserve
Bank that examines the institution in question to conduct an investiga-
tion. The FRCH typically responds to consumers within 15 business days
of the complaint submission.
After receiving the complaint from the FRCH, the Reserve Bank for-
wards the consumer complaint to the institution to obtain a written
response. During the complaint investigation, the Reserve Bank ana-
lyzes the documentation provided by the consumer and the institution
to determine if the institution violated a law, handled the situation
correctly, or corrected an error. The Reserve Bank communicates the
outcome of the investigation to the consumer in writing.
Addressing Inquiries and Potential Financial Scams
The FRCH receives thousands of consumer inquiries on a wide range of
topics each year. FRCH staff strive to provide consumers with informa-
tion about their rights to enable an understanding of financial products
and services, which may be useful in future financial decisionmaking.
The FRCH website offers information about many of these topics—
credit cards, checking accounts, electronic banking, mortgages, and
foreclosures. Consumers are directed to resources offered by federal
agencies and trusted organizations to get accurate and straightforward
information to answer their questions.
The FRCH also empowers consumers to recognize and report potential
scams. The FRCH website contains information alerting consumers to
164 Promoting Consumer Protection and Community Development
characteristics of a scam and provides a link for reporting the informa-
tion on a product or service they suspect is a scam.
Administering Consumer Laws,
Drafting Regulations
The Federal Reserve Board has rulemaking responsibility under specific
statutory provisions of the consumer financial services and fair lending
laws. The Board issues regulations to implement those laws and also
issues (directly or through staff) official interpretations and compliance
guidance for the financial industry and for the Reserve Banks’ examina-
tion staff.
The Board also regularly works with other federal financial regulatory
agencies in proposing rules and procedures to implement new laws
and amendments to existing laws. For example, the Board collaborates
Box 7.2. Federal Reserve Consumer Help: Responding to Consumer
Complaints and Inquiries
Federal Reserve Consumer Help (FRCH),
a centralized consumer complaint and
inquiry processing center, allows con-
sumers to contact the Federal Reserve
online or by telephone, fax, mail, or
e-mail.
The FRCH website (www.federalreserve
consumerhelp.gov) is a resource for
consumers to learn about financial
products and services and provides
instructions on how to file a consumer
complaint with the Federal Reserve.
e Federal Reserve System Purposes & Functions 165
with the Consumer Financial Protection Bureau, the Federal Deposit
Insurance Corporation, the National Credit Union Administration, the
Office of the Comptroller of the Currency, and the Federal Housing
Finance Agency to establish appraisal requirements for home mortgage
transactions. Joint efforts such as these aim to ensure that consumer
protections mandated by the Congress are enforced effectively across
all institutions.
Research and Analysis of Emerging
Consumer Issues
Thorough research and analysis about consumers, their financial experi-
ences, and the communities in which they live inform Federal Reserve
policymaking.
Thus, the Board and the Reserve Banks collaborate to identify trends and
emerging issues that impact the financial livelihood and well-being of
consumers and communities. This effort relies on a variety of resources,
including a wealth of data collected through surveys and independent
research. Findings from compliance examinations and trends in con-
sumer complaints also help to shed light on emerging issues. Sources of
data and information continually evolve as information resources and
technology provide better insights into the financial services and com-
munity development issues of consumers and neighborhoods.
To inform its research efforts, the Federal Reserve conducts consumer
focus groups, outreach to consumer and community groups, outreach
to academic and policy organizations, and consumer surveys to gain
insight into trends in consumer financial services, community economic
development, and policy matters. This information and data contributes
to the Federal Reserve’s work and provides the consumer perspective
for other Federal Reserve System functions.
166 Promoting Consumer Protection and Community Development
The results of the Federal Reserve’s research and policy analysis inform
Federal Reserve policymaking in various ways. Tracking and studying
emerging issues allows the Federal Reserve to evaluate the impact
that financial services and market trends may have on consumers and
communities. Results are often published and disseminated to inform
and foster discussion among regulators, industry groups, consumer and
community advocates, and academic and policy organizations.
The Federal Reserve has produced consumer- and community-focused
research and analysis that looks at consumer and household issues
Figure 7.3. Federal Reserve research examines trends and issues in consumer
nancial services
The Federal Reserve Board conducts the annual Survey of Household Economics and Decisionmaking (SHED), a nationally
representative survey that evaluates the economic well-being of U.S. households and identies potential risks to their nancial
stability. The survey includes modules on a range of topics of current relevance to nancial well-being, including housing,
credit access and behaviors, savings, retirement, economic fragility, and education and student loans.
Can’t afford down payment
Can’t qualify for mortgage
Cheaper to rent
More convenient to rent
Plan on moving soon
Prefer to rent
Currently looking to buy
Other
81%
of renters
would prefer
to own their
home if they
could afford
to do so
0% 10% 20% 30% 40% 50% 60%
Why
people
rent
9
9
12
25
22
27
31
50
Source: Report on the Economic Well-Being of U.S. Households in 2014, May 2015 (available in the Community Development
section of the Federal Reserve Board’s website, www.federalreserve.gov).
e Federal Reserve System Purposes & Functions 167
broadly, as well as a number of specialized topics, including
• unemployment and workforce development,
• community investment and stabilization,
• household economics and decisionmaking,
• consumers’ use of mobile devices to connect with financial services,
• financial decisionmaking by the older adult population, and
• economic and credit conditions in low- and moderate-income popu-
lations and neighborhoods.
For examples of the Federal Reserve’s research on consumer topics, visit
the Community Development section of the Federal Reserve Board’s
website at www.federalreserve.gov.
Community Economic
Development Activities
Because a strong economy and strong communities go hand-in-hand,
community development staff at the Federal Reserve Board and at each
of the Federal Reserve Banks work at the national, regional, and local
levels to help promote economic growth and financial stability in com-
munities across the country, particularly neighborhoods that are low-
and moderate-income and traditionally underserved.
Federal Reserve community development (CD) staff engage in a wide
variety of activities, focused on four topical areas:
• Policy and practice: Promoting the well-being of economically
vulnerable communities by enhancing the scale, sustainability, and
impact of the broader community development field.
• People: Helping to sustain and promote policies that improve the
financial stability and economic mobility of lower-income communi-
ties and individuals.
168 Promoting Consumer Protection and Community Development
• Place: Engaging in “place-based” efforts to revitalize lower-income
communities by advancing comprehensive community development
efforts targeted to geographically defined areas.
• Small business: Working with intermediaries to support small busi-
nesses and microenterprises in order to help increase the capacity of
funding and technical assistance providers; enhancing the availabil-
ity of credit and capital for small businesses; and building a deeper
understanding of small business trends and conditions.
The CD function of the Federal Reserve System is made up of dedicated
community development departments at each of the 12 Federal Re-
Figure 7.4. Federal Reserve community development efforts engage at the national and
local levels
The Federal Reserve has dedicated staff in each of its ofces throughout the country who work collaboratively to engage
stakeholders; to understand issues and challenges in low- and moderate-income communities; and to provide research, policy
insights, and technical assistance to support community and economic development programs. Community development staff
are located in each of the Reserve Banks and Branches.
Seattle
Portland
Helena
Salt Lake City
Los Angeles
San Francisco
Minneapolis
Kansas City
Chicago
Dallas
Atlanta
Cleveland
Richmond
Boston
Philadelphia
New York
St. Louis
Denver
Omaha
Oklahoma
City
Detroit
El Paso
San Antonio
Houston
Little
Rock
Memphis
Louisville
Nashville
Birmingham
Jacksonville
Miami
Charlotte
Cincinnati
Baltimore
Pittsburgh
New Orleans
Districts
Bank cities
Branch cities
e Federal Reserve System Purposes & Functions 169
serve Banks, as well as at the Board, that collaborate to advance effec-
tive community development policies and practices through a range of
activities, including
• Convening stakeholders: The function brings together practitio-
ners from financial institutions, nonprofits, governmental agencies,
and the philanthropic and private sectors to collaborate on commu-
nity and economic development initiatives and to identify both key
challenges and promising practices to address them.
• Conducting and sharing research: The function provides policy-
makers and practitioners with objective analysis on the economic
challenges facing lower-income communities and attendant policy
and program implications. CD research is often posted online in
blogs, articles, and working papers and is shared both in small group
settings and at larger scale conferences.
• Identifying emerging issues: The function gathers and analyzes
current information on economic and financial conditions to identify
emerging issues affecting lower-income communities and individu-
als. For example, staff regularly conduct web-based polls or surveys
of individuals and organizations to help track perceptions and pro-
vide market intelligence and sentiments around a wide range of CD
issues.
The CD function supports the implementation of the Community
Reinvestment Act through a wide range of activities, including assess-
ing community economic development and credit needs, fostering
conditions supportive of investment, lending and banking services in
low- and moderate-income communities, and sharing information
on lending and investment opportunities. CD also seeks to mobilize
ideas, networks, and approaches that address a wide range of com-
munity and economic development challenges. The function leverages
its capacity by working with intermediaries that offer financial, real
estate development, advisory, and human services, rather than working
directly with consumers or providing direct funding.
170 Promoting Consumer Protection and Community Development
Working at the National Level
The community development program at the Board of Governors serves
as the Federal Reserve’s primary liaison to national community organi-
zations and financial intermediaries on interagency projects and task
forces. This effort convenes local and national stakeholders to discuss
potential solutions to issues faced by communities throughout the
country.
In 2015, the Board established its Community Advisory Council (CAC)
to provide insights on the economic circumstances and financial ser-
vices needs of consumers and communities, with a particular focus on
the concerns of low- and moderate-income consumers and communi-
ties. The members of the CAC represent a diverse group of experts and
representatives of consumer and community development organiza-
tions and interests, including from such fields as affordable housing,
community and economic development, small business, and asset and
wealth building. This council complements the Board’s other advisory
councils—the Community Depository Institutions Advisory Council and
the Federal Advisory Council (see page 18 in section 2, “The Three Key
System Entities,” for more information on Board advisory councils).
In addition to the CAC, the Board seeks perspectives directly from com-
munity organizations, with community development staff collaborating
with a wide range of private and public entities, such as Neighbor-
Works America®, the Department of Housing and Urban Development,
the Small Business Administration, the Department of the Treasury, the
Department of Agriculture, and the Bureau of Indian Affairs.
The Board’s community development staff also promote and coordinate
systemwide, high-priority efforts. Initiatives have included close coordi-
nation with community development staff at the Federal Reserve Banks
to study the impact of foreclosed properties on communities and con-
sumers as well as the credit needs of small businesses. Such initiatives
result in collaborations with a broad range of government agencies at
the federal, state, and local levels, and conferences and other events
e Federal Reserve System Purposes & Functions 171
that brought together community organizations, lenders, academics,
and government officials. These efforts also have resulted in publica-
tions and reports that share promising practices and policy solutions,
as well as research and ongoing projects to address the challenges
confronting lower-income communities and individuals.
Box 7.3. Community Development: Targeting the Challenges and Concerns
on Main Street
The Federal Reserve leverages a net-
work of regional Reserve Bank staff to
support community development by
targeting the specific, unique chal-
lenges faced by different communities
throughout the country.
Community development website:
The Federal Reserve’s work in communi-
ty development is captured in a central
portal at https://fedcommunities.org.
The site links the System’s community
development resources and research by
topic and region.
Support for employment and
workforce development: The Federal
Reserve recognizes the challenges fac-
ing populations with historically higher
unemployment rates, such as youth,
the less-educated, and minorities, and
works to help identify effective policies
and practices that address obstacles to
employment.
Support for small businesses and
entrepreneurship: Viable small busi-
nesses and small-business owners are
key to vibrant local economies. The
Federal Reserve works to help identify
opportunities to improve access to
capital and credit for small-business
development.
Support for neighborhood revital-
ization: The Federal Reserve supports
efforts to align communities’ develop-
ment needs with available resources
and advocates the strategic use of data
and other tools to achieve this goal.
Federal Reserve staff and ofcials routinely convene conferences and events focused on commu-
nity development issues. In April 2015, Chair Yellen gave opening remarks at the System’s ag-
ship biennial community development research conference, “Economic Mobility: Research and
Ideas on Strengthening Families, Communities, and the Economy.” (Conference materials are
available at https://stlouisfed.org/community-development/economic-mobility-conference-2015.)
172 Promoting Consumer Protection and Community Development
Engaging at the Local Level
The community development issues faced by different regions of the
country are often unique to each region because of differing market
influences and trends. In recognition of this dynamic, the Reserve Banks
develop their own programs to target the most pressing community
and economic development needs and issues in their Districts.
Much of this work involves promoting mutually beneficial relationships
between local governments, financial institutions, nonprofit organiza-
tions, and the communities those entities serve. The Federal Reserve
Banks sponsor forums and conferences to provide research and policy
insights on community development issues and offer the opportunity
for stakeholders to engage face-to-face. In addition to bringing these
stakeholders together, community development staff provide them with
the information and technical assistance needed to develop and imple-
ment effective community and economic development programs.
