CU Trades: Proposed CDFI Target Market Rules Would Be Illegal

Both CUNA and NAFCU outlined concerns over proposed CDFI Target Market rules and questioned their legality. Learn why.

David Baumann


Dec 22



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David Baumann

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David Baumann

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CUNA, NAFCU both outline concerns related to data collection and questions about race.

Proposed Target Market Assessment rules issued by the CDFI Fund are unworkable because they would force financial institutions to ask questions or make assumptions that violate federal law, the national credit union trade groups told fund officials this week.

“The policy goal of [the Equal Credit Opportunity Act] is to create a lending environment that is blind to race and ethnicity, among other characteristics,” Elizabeth Sullivan, CUNA’s senior director of advocacy and counsel, said, in commenting on the proposal. “This is directly at odds with the policy goals of the fund’s approach, which is to create a lending environment that is explicitly conscious of race and ethnicity.


Currently, applicants for CDFI Certification must describe and seek approval for each assessment methodology they use—and plan to use—to demonstrate financing activities within their identified Target Markets.

Using the revised application, applicants would select from a drop-down menu the options in the list that they used for each of their Target Market components.

Comments on the proposal were due last week.

CUNA Comments

Sullivan said further that the CDFI Fund must establish reasonable reporting requirements that take into account the regulatory frameworks financial institutions must follow.

She added that racial and ethnic data collection the fund is contemplating would violate the Equal Credit Opportunity Act. The proposal also would require data to be collected from entire families in an effort to compare family income to the HUD’s income limits.

To make matters even more complicated, the fund’s proposal would, under certain circumstances, require credit unions to assess race and ethnic information based on visual observation and surname.

“Some credit unions feel racial and ethnic assessments based on visual observation and surname expose their institutions to litigation concerns and reputational risk,” she wrote.

NAFCU Comments

A NAFCU official agreed that the proposal may violate federal law.

“Lenders are prohibited, under the Equal Credit Opportunity Act and Regulation B, which protects applicants in a credit transaction from discrimination, from inquiring about the race of a credit applicant with a very limited number of circumstances providing exceptions,” said Aminah Moore, the trade group’s senior regulatory affairs counsel.

Such reporting requirements could discourage a person from doing business with a CDFI, she added.

“This may impact whether an individual turns to a CDFI for their financial service needs because they do not want to answer a race question or more importantly do business with an institution that would even ask such a question,” Moore wrote.

Deadline Extended

In other CDFI news, the Treasury Department announced Wednesday that it is extending the deadline to submit comments on proposed plans to the CDFI Annual Certification and Data Collection Report and abbreviated Transaction Level Report to Jan. 27.

The original deadline was Jan. 13 and fund officials said it was being extended to give organizations more time to prepare their comments.


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