Proposed CDFI methodologies could violate Equal Credit Opportunity Act

CUNA has several concerns with the Treasury’s Community Development Financial Institutions (CDFI) Fund’s proposed Target Market Assessment Methodologies, it wrote to the Fund Monday.

The CDFI Fund requires that in order to obtain and maintain a CDFI certification, an entity must demonstrate that it serves an eligible Target Market and directs at least 60% of its financial products to its Target Market.

“CUNA applauds the CDFI Fund’s publication of this notice and the acceptance of comments in advance of publishing the approved list of assessment methodologies. It is indeed an important effort towards transparency and efficiency that is highly appreciated by current and future CDFI credit unions,” the letter reds. “However, many credit unions report that some of the assessment methodologies on the CDFI Fund’s Proposed Pre-Approved List have only been used by the Fund recently, and that in early 2022 and prior years, credit union assessment methodologies were far more reliant on the use of proxies which the Fund recently began rejecting.”

CUNA is particularly concerned that some of the methodologies are likely violations of the Equal Credit Opportunity Act (ECOA) and its implementing regulation, Regulation B. CUNA attached a legal opinion letter to its comments outlining these concerns.

“If the CDFI Fund disagrees with the legal analysis contained in the attachment, it should not adopt these methodologies as pre-approved unless it has first consulted with every agency tasked with enforcement of ECOA and secured publicly available guidance providing certainty for CDFIs that their examiners concur with the Fund’s analysis,” the letter reads. “

“Further, the CDFI Fund should also obtain an interpretation from the Consumer Financial Protection Bureau clearly stating that the assessment methodologies do not violate ECOA or Regulation B to provide CDFIs with colorable defense against potential civil liability,” it adds.

CUNA also asks the Fund to permit credit unions to make broad use of proxy and modeling data and encourages the Fund to add Asian American/Pacific Islander as a potential Target Market.