Talks Continue on FOM, CDFI Legislation as CUNA, NAFCU Push Forward

Testimony during a Senate Subcommittee hearing Wednesday continued the months-long discussions and debates surrounding the expansion and impact Community Development Financial Institutions (CDFIs) have on the under- and unbanked people in the country.

For those members who attended the Senate Banking Subcommittee on Housing, Transportation, and Community Development hearing, most were extremely positive about the financial impact CDFIs have had on communities, especially during the pandemic. Sen. Mark Warner (D-Va.) suggested increasing CDFI funding in the FY 2022 budget by $90 million, which would bring the total budget up to $360 million.

House and Senate committees have met several times since the “Expanding Financial Access for Underserved Communities Act” was introduced last May, which would update the language of the Federal Credit Union Act to increase the reach and availability of CDFIs. Despite the continued pressure from CUNA and NAFCU, the legislation has not made it out of committee as talks continue.

In letters to the Senate Subcommittee this week, NAFCU and CUNA offered lawmakers reasons to keep the conversation moving forward to hopefully bring the issue to a vote.

“The Expanding Financial Access for Underserved Communities Act would significantly address the epidemic of the unbanked and underbanked in the United States by making it easier for consumers in areas without sufficient financial services providers to access credit unions,” CUNA President/CEO Jim Nussle wrote. “We strongly support this legislation, which would make three changes to the Federal Credit Union Act to enable and encourage credit unions to serve underserved and abandoned communities and promote financial inclusion to all at no cost to the taxpayer.”

“NAFCU appreciates Congress’s continued support for funding for the Community Development Financial Institutions (CDFI) Fund and the Community Development Revolving Loan Fund (CDRLF), especially the additional funding for CDFIs as part of pandemic relief efforts,” NAFCU Vice President of Legislative Affairs Brad Thaler wrote. “As the economy continues to recover, we urge Congress to support increases in both CDFI and CDRLF funding in any fiscal year 2022 spending bills. This would provide the resources needed to keep these important programs properly functioning.”

According to CUNA, the legislation would make three important changes to the Federal Credit Union Act, if passed.

Those three items included:

1. Allowing credit unions to expand their FOM to include underserved communities.
2. Exempting business loans in underserved areas from the member business lending cap.
3. Expanding the definition of an underserved area to include any area more than 10 miles from the nearest financial institution branch.

According to a survey completed by the FDIC in 2021, more than 6% of households in the U.S., or 14.1 million adults, are unbanked.

In Thaler’s letter, he also reiterated NAFCU’s suggestion to create a separate pilot program for the purchase of non-conforming loans from CDFIs by the Government Sponsored Entities (GSEs).

“Credit unions that are classified as CDFIs are best situated to originate loans to the communities most in need,” Thaler concluded. “NAFCU believes that one way to help address the widening homeownership gap for minorities would be for the FHFA to permit the GSEs to purchase mortgages like the ones made by CDFIs to their communities through new pilot programs with less stringent purchase criteria in order to facilitate a vibrant secondary market.”

Beyond this week’s Senate Subcommittee meeting, there are no more legislative hearings scheduled concerning the Expanding Financial Access for Underserved Communities Act.