Banks have found an unusual way to comply with the Community Reinvestment Act (CRA), the federal law requiring them to bolster the economies of low-income neighborhoods: They’re funding a program dedicated to fighting crime in nursing homes.
While critics say the program circumvents the spirit of the CRA, backing by U.S. financial regulators has helped the Senior Housing Crime Prevention Foundation sign up 250 banks in 47 states to lend or invest almost $350 million for its Senior Crimestoppers program. The money pays for personal lockboxes for nursing home residents, a 24-hour crime-reporting hot line, and entertainment including karaoke machines and video game systems.
Banks that don’t comply with the CRA, which took effect in 1977, must face restrictions when they seek to expand. While some large banks such as SunTrust Bank and BB&T participate in Senior Crimestoppers, the program has special appeal for institutions with a few billion dollars in assets that may have difficulty competing with bigger banks for CRA-qualified investments, foundation officials say. Spokesmen for SunTrust and BB&T declined to comment.
Banks that donate to the foundation are doing little to promote economic development, says Peter Skillern, executive director of the Community Reinvestment Association of North Carolina, a nonprofit advocacy group. “That is not in any way related to lending or investing in neighborhoods,” Skillern says.
Banks giving money to Senior Crimestoppers get CRA credit for more than they actually contribute. They park their donations in government bonds or other instruments of their choosing and keep any returns above a 1 percent fee they turn over to Senior Crimestoppers. The organization uses its cut to pay for the lockboxes and other program expenses. The banks get their principal back in several years, and regulators routinely give them credit for the full amount on deposit with the program, rather than just the 1 percent in interest they effectively donate.