Lawmakers say credit unions are having to meet “unreasonable requirements” as the CDFI certification process is overhauled.
Contending that CDFI Fund officials are not providing the guidance needed for credit unions to maintain their certifications, two House Republicans are calling on the Treasury Department to offer provisional certifications for certain credit unions.
“We believe that the CDFI Fund’s lack of meaningful communication and guidance is placing unreasonable requirements on CDFI-certified credit unions as it works towards unveiling a new application for all entities currently scheduled to launch in April 2023,” Reps. Andy Barr, R-Ky., and John Rose, R-Tenn., wrote in a letter to fund Director Jodie Harris last week.
“The confusion and disruption for the entities eager to serve CDFI target markets is hurting Americans and small businesses struggling to overcome the economic devastation left in wake of the pandemic,” they wrote.
The lawmakers asked Harris to offer provisional approval to any CDFI credit union that retained their certification during the previous year and has an application submitted before Sept. 30.
Background on the Issue
The CDFI Fund has announced it will not accept applications between the end of September and April 3, as it overhauls the certification application and reporting requirements.
However, credit union trade groups have complained that there is a huge backlog of applications and that many recertification applications remain in limbo.
What Is the Letter Asking For?
In their letter, Barr and Rose ask Harris to develop a pathway that does not threaten termination of CDFI applications.
“This provisional status will allow credit unions to continue serving their previously approved target markets, collect grants and awards, and complete Emergency Capital Investment Program (ECIP) loans through the completion of the application moratorium,” they wrote.
The two lawmakers said that in providing pandemic-related funds for CDFIs, Congress expected the infusion of cash to help communities struggling with the impact of the crisis.
They added credit unions are having to waste valuable time and resources to “meet confusing and opaque standards amid Fund-erected time constraints.”
The House members noted further that CDFI credit unions are reporting a variety of problems, including:
–Receiving form letters stating that their applications have been placed into a “cure status,” with a specified resolution deadline. However, the letters do not provide details about the problems that fund officials found. Instead, the credit unions must open a “service request” to obtain those details.
–Having applications placed in cure status because of the racial, ethnic, employment or residency of their democratically elected boards. The credit unions only recently have been told they can establish advisory boards to meet the diversity requirements, the House members said. Those credit unions must establish those boards within a matter of weeks.
–Having problems meeting the thresholds for dollar amounts of transactions because of the number of home refinances that occurred during the pandemic.