CU Trades Seek Clarity on Role of Overdraft in CDFI Application
CUNA and NAFCU have asked for clarification concerning the role overdraft programs will play in the new CDFI certification application.
Update on new CDFI Certification process expected July 31.
As the CDFI Fund prepares to take the next step in overhauling its application and certification process, CUNA and NAFCU are asking for clarification concerning the role that overdraft programs or bank policies relating to insufficient funds may play in the certification process.
In a letter to the fund, the credit union trade groups wrote that if questions about those policies are being asked for informational purposes, they should be removed from the application. If, however, fund officials intend to use those questions to determine eligibility, they should provide guidance about their expectations.
“It is critical that the Fund ensure that predatory lenders cannot access CDFI certification and Fund resources, and make sure that CDFI-certified institutions are meeting strong standards for responsible lending and effectively reaching historically redlined, rural, immigrant and other under-resourced communities,” the trade groups stated in a letter to CDFI Acting Director Marcia Sigal.
Backstory and Context
The CDFI Fund is currently in an extended blackout period and is not certifying new CDFIs as officials attempt to update the application and certification process.
A subcommittee of the fund’s advisory board is scheduled to report on its recommendations during a meeting on July 31.
Members of Congress and financial services trade groups have expressed frustration with the slow pace of the overhaul process. However, in their letter, the two credit union trade groups said they appreciate the fund’s “strategic pause” as officials evaluate stakeholder feedback.
The groups also made technical recommendations about potential changes to the application and certification process, while reminding fund officials of the role CDFI credit unions play.
“CDFI-certified credit unions and cooperativas are key to achieving the mission of the CDFI movement,” the letter reads. “They work every day to expand economic opportunity for people and communities who have been excluded from the mainstream financial system.”
They added that 531 credit unions and cooperativas are CDFI-certified. Together, those institutions have more than 2,800 branches, serve more than 20.5 million members and last year lent more than $192 million in their communities.
“They effectively leverage CDFI resources, lending $12 in their communities for every dollar in award funding,” the letter reads. “And their cooperative structure means that credit unions and cooperativas do well only when their members do well.”