Posts tagged ‘CDFI’

Why Your Credit Union Should Be Looking at a CDFI Designation

If I have one request of my faithful blog readers today, it is that you schedule time in the near future to consider whether or not your credit union should seek certification as a community development financial institution (CDFI). Here’s why.

First, NCUA announced that it would be opening a streamlined CDFI application round starting on January 24th. Don’t assume that your credit union is too big to qualify for the certification.

Secondly, yours truly has found no downside to getting your CDFI certification. Not only are you eligible for grants, but as we have seen with the rollout of the newest round of the PPP, CDFIs are increasingly getting regulatory and legislative priority over more traditional lenders.

Third, let’s look at the big picture. NCUA has also recently issued a letter urging multiple SEG credit unions to more aggressively pursue expanding into underserved communities. On the state level, the Legislature passed historic legislation allowing credit unions to receive public deposits from the Comptroller’s office in return for opening a branch in an underserved area. I know last year was a lousy year, and let’s be honest, 2021 isn’t exactly getting off to a better start – but what all these initiatives have in common is a desire on the part of regulators and lawmakers to see financial institutions in general, and credit unions in particular, take more aggressive steps to integrate underserved persons into the financial mainstream.

Which brings me to the last reason I want you all to at least examine whether or not you qualify for CDFI designation. In the coming years, the industry is going to be under a microscope like never before. Every credit union that makes legitimate efforts to participate in these programs is not only helping itself and its members, but the industry and our mission as a whole.

January 14, 2021 at 9:30 am Leave a comment

PPP Open For Business – For Some

You may have seen this press release from the Small Business Administration, announcing that the Paycheck Protection Program was once again open for business, but there’s a good chance that your credit union was unable to process loans. 

The SBA announced that it was providing an exclusive window to community financial institutions. This means that unless your credit union is a CDFI or MDI, an NCUA designation which includes this list of credit unions, it is not eligible to begin processing these loans (for those of you scrolling, you can find the SBAs definition at 15 U.S.C. 636 (a)). The steps taken by the SBA are in part an understandable response to the first PPP rollout. Remember all of those articles about how the big banks and their favorite clients dominated the process? The hope is that smaller institutions, which tend to give more loans to small businesses, will be more willing and able to participate if they’re guaranteed access. Still, it does mean that many credit unions are largely excluded from this first stage of the rollout.

Credit unions with less than $10 billion in assets will have exclusive rights to lending out from a pot of no less than $15 billion that’s been set aside. However, community banks with the same asset size limits are also included in this pot, as well as institutions chartered under the Farm Credit System. The good news to take away from this is that your credit union will not have to wait in line behind big banks with infrastructure set up specifically for this type of process. (Section 1102(b) of the CARES Act (Public Law 116–136)). 

First Virtual State of the State

The Governor gave the first part of – hopefully – his only virtual State of the State address yesterday. We will be looking through his proposals, but right now, it seems like the issue that could have the greatest impact on credit unions is his plan to legalize the sale and distribution of marijuana on the state level.

January 12, 2021 at 9:58 am Leave a comment

Going Viral: Four Key Reg. Developments Over The Weekend

Regulators are scrambling to keep up with the virus.  In recent days the SBA released the forms to be used when making Paycheck Protection Program loans, the Department of Labor released additional guidance on your COVID-19 related HR obligations, the Financial Crimes Enforcement Network (FinCEN) published guidance on its expectations for lenders during the outbreak and the recently finalized State Budget includes a $25 million commitment to fund the state level Community Development Financial Institutions (CDFI) program over the next five years.

To Loan or Not to Loan, That is the Question

There continue to be numerous published reports about how banks and credit unions need more guidance about the Paycheck Protection Program passed last week.  The good news is that over the weekend, forms were posted to SBA’s website.  The most basic point I want to stress to you is that by signing or submitting the “CARES Act Section 1102 Lender Agreement” posted on SBA’s website, you are committing to participating in the PPP.

On a personal note, I’m a little concerned that the industry is suffering paralysis by analysis.  These are not normal times, and if your plan is to wait for the dotting of all the Is and the crossing of all the Ts before starting to make these loans, you have effectively decided not to participate in the program.

FinCEN Issues Updated Guidance

FinCEN moved quickly to update guidance to address lender obligations related to PPP loans specifically, and lender obligations during the pandemic in general.  Most importantly, it addresses lender obligations under the CARES Act.  The FinCEN guidance informs credit unions and banks that PPP loans for existing customers will not require re-verification of existing BSA information unless otherwise indicated by the institution’s Risk Based Approach.  How’s that for decisive equivocation?  The guidance also touches on timing requirements for the filing of Currency Transaction Reports.

DOL Issues More Guidance on Employee Relief

The Department of Labor issued updated guidance on paid sick leave and expanded family leave under the quickly changing federal law.   I still do not see much relief for businesses with 50 or fewer employees that have to comply with these laws, but I will provide additional information as it becomes available.

State Budget

This year’s state budget was passed with more secrecy than a papal conclave.  But now that the puff of smoke has risen, it appears that credit unions that are CDFI certified have reason to celebrate.  According to the Governor’s press release, the budget includes $25 million over five years to support New York’s Community Development Financial Institutions Fund.  For almost two decades, New York has had this Fund in place, but has never funded it.

The budget also creates an Office of Financial Inclusion and Empowerment to meet the financial service needs of low and middle income New Yorkers.

April 6, 2020 at 9:52 am Leave a comment

Financial Issues Loom as a New Legislative Session Begins

Good morning!

This is actually one of my favorite days of the year. It is a cross between the first day of school and the first day of spring training for Met fans. So many possibilities, so much hope… so much room for disappointment.

The Governor gives his annual State of the State address today, and given the amount of information that has already been leaked about the presentation, it’s fair to say that financial empowerment is going to be a prominent theme in 2020. Most notably, it appears that Governor Cuomo is going to propose funding the state level CDFI fund. To put this in perspective, more than a decade ago, the legislature enacted a legal framework for a state-level fund to aid in community development financial institutions. Significantly, several credit unions in New York State are CDFIs, but the designation is not limited to traditional financial institutions.

Ever since the framework was created, however, the fund has been nothing more than an outline as it has never actually received funding. Frankly, I have never understood why this is the case, since I’ve never met anyone who opposes the idea. Now, it appears that the Governor’s high level of support at the start of the budget season may actually bring about some action, with $25 million being committed to the fund over a five year period. It is a start.

The Governor’s initiative is part of an effort to “increase access to safe, affordable bank accounts and small-dollar loans in underserved low-income communities across the State.”

Again, this is opening day. We won’t know until the press release gets translated into legislative proposals precisely what will be undertaken or its impact on credit unions.

Meet the New Boss

This is always the time of year when committee memberships get shifted around. One change worth noting is the announcement that Assemblyman Thomas Abinanti of the Westchester area will be the new Banks Chair. He replaces Assemblyman Ken Zebrowski, who has sponsored our municipal deposit legislation in the past. We will of course be reaching out to Assemblyman Zebrowski to discuss the Association’s priorities.

…Speaking of new bosses, Central New York Assemblyman Will Barclay has been named the new leader of the Assembly Republican Conference. The position has waned in recent years as the Assembly is comprised of just 42 Republicans, giving the Assembly Democrats the ability to override vetoes without Republican support. Still, the Minority Leader has a high-profile bully pulpit. In addition, Republicans can delay passage of bills by forcing debate on proposed legislation. In the past, the Assemblyman has been a sharp critic of credit unions.

January 8, 2020 at 9:05 am Leave a comment

When It Comes To Core Processors, The Tail Is Wagging The Dog, But Why?

If you increasingly feel like you’re a vendor of your core processor, you are not alone.

A reader sent me this recent article from the WSJ and it speaks to the frustration that many credit unions and community banks, particularly those with $1 billion or less in assets, feel when dealing with their core processors.

The article points out that even though small credit unions and banks know they have to quickly provide new technological offerings, they often find that their processors are either incapable of accommodating new technology or slow in making it available. Why not get out of the contract? According to the article, more and more institutions are trying to do just that. But as I can vouch for having read a couple of these cases, the contracts are extremely well drafted for the core providers. It is rarely cost-effective to try to prematurely end them.

Is the purpose of this blog just to feel your pain? Why, no. Yours truly is in an exceptionally optimistic mood after having watched his Islanders sweep a playoff series for the first time since 1983. So, against all my better judgment, I’m going to throw out a couple of foolishly idealistic suggestions. First, when it comes to the contract terms – push back. You might get one or two concessions and it’s absolutely crucial that you understand what its terms are anyway.

Secondly, even though three companies dominate 90% of the market for small credit unions and community banks, it doesn’t have to be that way. I find it hard to believe that in this age of nonstop venture capital infused innovation, there aren’t one or two companies out there worth taking a gamble on, particularly if you get greater flexibility in your contract.

Did you know that the original version of the Federal Credit Union Act would have authorized state-wide “central” credit unions? The clever business men who were behind the credit union movement in this country understood that cooperatives work best when they actually cooperate. For the life of me I don’t understand why small to medium-sized credit unions are so resistant to pooling their resources together and developing a single core processing platform which could cost effectively address their needs. I believe some CDFI’s are trying this approach and I hope their experiment takes hold while there are still enough credit unions around to make the idea worth pursuing.

On that idealistic note, yours truly is taking tomorrow off but will be back on Monday. Remember, don’t talk politics at the dinner table, it just isn’t worth it.

April 18, 2019 at 8:00 am Leave a comment

Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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