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The NCUA will eliminate the streamlined application process for CDFI certification. Learn what this could mean for your credit union.
The National Credit Union Administration (NCUA) revealed this week it will discontinue the streamlined Community Development Fund Institution (CDFI) application process that made up part of its NCUA-CDFI Certification Initiative.
Any credit union seeking to apply for the recognition must now use the standard application provided by the CDFI Fund.
According to an NCUA media contact, the decision comes as “the Treasury Department will be updating its CDFI certification application and reporting requirements.” In the message announcing the move, the NCUA still said it “encourages eligible credit unions to explore CDFI certification.”
What is CDFI Certification?
A CDFI Certification is a designation conferred by the Community Development Financial Institution (CDFI) Fund of the Department of the Treasury, which recognizes a financial institution as specialized in serving low-income communities and those without access to financing, provided it meets certain criteria.
Credit unions are among the organizations eligible for certification, which can lead to major benefits such as Financial Assistance Awards of up to $2 million and Technical Assistance Grants of up to $125,000.
Over the past two years, due largely to increases in government relief funding tied to the COVID-19 pandemic, the number of CDFI-certified credit unions has grown substantially, from 224 in 2020 to 464 today.
In 2021, the CDFI gave out 1,395 awards totaling $1.4 billion altogether.
How Will this Change the Application Process?
Previously, there were two options for the application process: the standard and the streamlined approach.
While submitting a standard application involves going directly through the CDFI Fund, the NCUA also offered a streamlined approach specifically for Low-Income Designated (LID) credit unions. The idea behind this this was to speed up and facilitate the overall process by pre-qualifying institutions that already met CDFI criteria by means of their LID status.
Now, all credit unions will apply directly to the CDFI Fund.
How Will this Impact Credit Unions?
There’s no question the streamlined application proved a less burdensome path to certification for some credit unions, due largely to the oversight and help from the NCUA. Already, the National Association of Federally-Insured Credit Unions (NAFCU) has bemoaned the decision, claiming it will adversely impact smaller and low-income credit unions seeking CDFI certification.
However, it’s worth noting the streamlined approach was ultimately a much narrower route to certification. In fact, many currently certified CDFIs would not even have qualified through the approach due to the highly specific and somewhat arbitrary criteria applied to analyzing and reviewing the loan file of each institution.
Further, many credit unions denied using the streamlined approach were unaware the standard application still remained open to them, which in fact might have proven the better option from the start. The removal therefore of this general confusion surrounding the two applications, which both credit unions and trade organizations have lamented, should lead to a more responsive and straightforward process.
Final Takeaway
This announcement should therefore be viewed as an opportunity for credit unions seeking CDFI certification opposed to a setback. Clearly, despite the rising number of certified institutions, both the NCUA and CDFI Fund have acknowledged a change is needed moving ahead. Even if the streamlined application was successful in helping many LID credit unions attain the designation, it doesn’t mean those same institutions would not have also been successful through the standard approach.
The number of credit unions applying for CDFI certification appears set to keep growing as the Fund’s Coalition continues to push for increased funding going forward. A new application process means credit unions will no longer be forced to make a decision on which route to follow or face the longer odds through the streamlined approach.
Ultimately, the path to CDFI certification will become much clearer.
How CUCollaborate Can Help
While moving to a single, standard CDFI application should prove simpler overall, the process itself can still often be arduous and time-consuming. This is why at CUCollaborate we provide a tailored approach based on data-driven insights and guarantee we can pre-qualify your credit union entirely free of charge.
Learn more by visiting our CDFI Certification page or connect with us directly through our CDFI Certification Consulting Services and begin the process today.
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