The Community Development Financial Institutions program is biased toward non-credit union, non-bank grant recipients that are largely unregulated, seven trade groups, including CUNA and NAFCU said Tuesday.
The groups, including the National Federation for Community Development Credit Unions and major banking groups, are asking congressional appropriators to include language in their FY2018 spending bills that reaffirms their intention that the program supports the entire CDFI sector.
The groups contend that the current CDFI evaluation process used by the Treasury Department combines all applicants, including nonprofit loan and venture capital funds into one pool.
That has resulted in unregulated loan funds receiving 81% of all CDFI funds between 1996 and 2016. During that time, regulated financial institutions, including credit unions and banks, represented 50% of all CDFI applicants, the trade groups said.
“The single pool evaluation process creates unintended – but real – bias that plays to the strengths of the unregulated CDFI sectors while ignoring the strengths of the regulated CDFIs,” the groups said in their letter.
They added that the Treasury Department has acknowledged the problem, but needs specific language from Congress to address the issue.
The groups are requesting appropriators to award CDFI using a formula that is “proportional by number to the applicant pool for each funding round.”
The CDFI program received $248 million for FY2017 when Congress completed the funding process earlier this year, even though the Trump Administration targeted the program for elimination.
