Final answer:
The Community Reinvestment Act requires periodic evaluations of a lender's lending record to ensure fair practices, including serving low-income individuals. The Federal Reserve System enforces this and other consumer protection laws. Loan issuance involves credit checks and potentially, collateral or a co-signer.
Step-by-step explanation:
The subject you are referring to is the Community Reinvestment Act (CRA). This act was established to ensure banking institutions meet the needs of their respective communities, including low and moderate-income neighborhoods. It requires the regular assessment of an institution's record of meeting the credit needs of its entire community.
The CRA is enforced by the Federal Reserve System (Fed), which ensures that banks comply with a wide array of consumer protection laws, such as non-discrimination and public disclosure of loan-related information.
Prior to making a loan, banks typically require borrowers to complete forms about their income and other financial data as part of a credit check. In some instances, collateral or a co-signer may be necessary. These procedures are all in line with the aims of the CRA to ensure fair lending practices.
Learn more about Community Reinvestment Act