Is New Data From CDFI Fund Forcing a Rewrite of Proposed Certification Updates?

Back-to-back announcements from the Treasury’s Community Development Financial Institution (CDFI) Fund on July 5 and 6 have credit union leaders wondering if the Fund is taking another look at credit union comment letters before sharing any new certification application updates.

To recap earlier events, the CDFI Fund released a preview of its highly controversial proposed application revisions in October 2022. In December 2022, CUNA commented formally that the CDFI Fund’s proposed certification application changes would exclude “significant swaths” of credit unions. Interestingly, the CDFI Fund’s current advisory board has a representative from every category of CDFI except credit unions.

As recently as June 15, Jason Boehlert, program manager, legislative and external affairs for the CDFI Fund, stated at a credit union conference in California that, even taking into account public comments on the new Certification, the Fund would be making changes, but when pressed he acknowledged they will not be significantly different from what was seen in October’s proposal.

The most recent meeting of the CDFI Community Development Advisory board was scheduled for July 7. At this meeting, the Subcommittee on CDFI Certification was scheduled to present its recommendations on the updated application.

However, the CDFI Fund unexpectedly announced on July 6 that it was postponing that meeting, a day after the July 5 release of data on the FY 2021 activities of the CDFI Program and NACA program Financial Assistance Award recipients. This is the first snapshot the public has had of the impact of what their tax dollars are achieving through the CDFI Fund appropriation. The meeting has since been rescheduled for July 31.

The data in the Fund’s report decisively illustrate that credit unions quantifiably have the greatest impact in meeting the congressional mandates for the CDFI Fund of any CDFI-certified institution type.

Digging into the numbers provided by the CDFI Fund in the report, it’s clear credit unions provide taxpayers the greatest return on investment with the CDFI Fund resources, providing 89% of the number of loans reported to the CDFI Fund and originating 63% of loan volume, despite comprising only 23% of reporting CDFIs. That’s 13 times the number of loans deployed by banks, 22 times that of loan funds and more than 2,000 times that of venture funds.

A closer look at the data further reveals the CDFI Fund’s ability to report impacts to Congress will dwindle without credit unions, which contribute more than all CDFIs combined:

• Credit unions provided 92% of all loan dollars that went to the CDFI Fund’s qualifying Low-Income Targeted Populations (consumers), according to the report.
• Credit unions provided 93% of all consumer loans reported to the CDFI Fund in 2021.
• Credit unions also provided the largest number of home improvement and purchase and residential real estate loans, at a rate four times that of banks and nearly eight times that of loan funds.
• Credit union loans all had lower interest rates than every other CDFI type for business/microbusiness, commercial real estate, home improvement/purchase and residential real estate. Interest rate data are not collected for consumer loans.
• Credit union loan terms were longer, making the loans more accessible than every other CDFI type.
• Across all categories of distressed borrowers, credit unions made $13.8 billion in loans – more than all other CDFI types combined.
• And significantly, given that congressional appropriations carved out funds specifically devoted to lending in Persistent Poverty Counties, credit unions provided five times more loans in Persistent Poverty Counties than loan fund CDFIs.

Credit unions are clearly showing the most significant return on grant funds, in terms of fulfilling the CDFI Fund’s mission of providing access to affordable financial products and services. And yet, credit unions are not just a minority in the numbers of CDFIs receiving grant funding, they receive relatively smaller awards. Looking at the CDFI Program Awards granted in 2021, credit unions made up 27% of all award recipients yet only received 20% of funds.

Upon reviewing the information in its own report, is it possible the CDFI Fund Advisory committee is finally seeing that it should take the input from credit unions and CUNA’s concerns about mass decertification seriously? Ignoring credit unions’ results in support of the CDFI Fund mission would be folly.

Now the question before the CDFI Fund is, will it work with the NCUA to ensure the new certification proposal is aligned with the not-for-profit credit union business model? Or will the Fund sacrifice credit unions and its own ability to deliver results in line with congressional mandate for the sake of staying the course?

Stacy Augustine is President/CEO of CU Strategic Planning in Tacoma, Wash.