Financial Services Coalition Asks Congress to Help Block CDFI Proposal
Both credit union and banking groups among those contesting planned updates to CDFI Certification process.
Saying they are “gravely concerned” about proposed changes to the CDFI Certification process, a coalition of financial services trade groups is asking for Congress’ help in convincing the Treasury Department the updates are misguided.
“Specifically, we strongly believe that the proposed changes will significantly undermine the efforts of CDFIs to meet the needs of borrowers in low-income and distressed communities,” CUNA, NAFCU, Inclusiv, the American Bankers Association, the Independent Community Bankers of America, the Community Development Bankers Association, and the National Bankers Association wrote in letters to both the House Financial Services Committee and the Senate Banking Committee.
The groups go on to question the process being used by the CDFI Fund and the Treasury Department to modify the program.
Background: The Proposed Changes
The CDFI first proposed a revised application in May 2020 and, following that comment period, fund officials decided to make additional changes.
Among other updates, the new application would measure an applicant’s target financing over the most recently completed fiscal year and eliminate the requirement that data on its year-to-date activity also be provided, according to officials.
When the CDFI Fund solicited comment on those proposed changes in November, it used the Paperwork Reduction Act (PRA) process. That law requires agencies to ask for public comment on how long it would take to fill out applications and other documents required by federal programs.
Inside the Letters: Questioning the Process
The financial trade groups say that the process was “procedurally inappropriate” and does not allow for sufficient consideration of stakeholder feedback.
They noted specifically that when the initial changes were proposed in May 2020, stakeholders expressed great concern about the rigidity of the proposed standards and asked for more engagement with the CDFI “to craft a solution that would protect the integrity of CDFI certification, while allowing mission focused CDFIs to continue to be flexible and responsive to the needs of their communities.”
Fund officials did not engage in any further discussions with industry representatives, the groups said.
They added that the November proposal goes beyond the simple information collection proscribed by the PRA. That proposal, they contend, constitutes major policy changes in eligibility and certification.
“We believe it is inappropriate to implement significant policy changes via the PRA,” they wrote. “PRA governs the collection of information only.”
The groups said further that mission driven CDFIs will be forced to decide whether to adjust to the new process and reduce service and access for CDFI Target Markets or forego certification altogether.