WASHINGTON— The Treasury Department said Thursday it will move to tighten oversight of the Community Development Financial Institutions Fund, announcing a forthcoming proposed rule that would classify certain CDFI-funded awards as “federal public benefits” under the 1996 Personal Responsibility and Work Opportunity Reconciliation Act, a change Treasury said is aimed at ensuring taxpayer-funded benefits are not provided to “illegal aliens” or other non-qualified noncitizens.
Treasury also said it is adding new compliance language to CDFI Fund agreements requiring certified CDFIs to maintain policies designed to ensure they do not violate federal anti-discrimination laws.
Treasury said the NPRM will clarify that some benefits financed through the CDFI Fund fall under PRWORA’s restrictions, while new contract provisions will require certified CDFIs to annually certify they have policies and procedures in place to prevent employment or financial preferences or set-asides based on race, ethnicity or sex that conflict with federal law. Treasury said those policies must be available for review upon request, and warned it could pursue remedies for noncompliance including decertification, termination of unused funds and recapture of prior awards.
“Under President Trump’s leadership, we are enforcing the law and preventing the abuse and misuse of CDFI Fund grants intended solely for American citizens and lawful residents,” said Secretary of the Treasury Scott Bessent. “Treasury will continue to use its authority to prevent waste, fraud, and abuse in all forms, including by safeguarding taxpayer money awarded by the CDFI Fund.”
The move adds a new compliance layer for many credit unions, which have a significant footprint in the CDFI ecosystem--credit unions make up the largest group of certified CDFIs.
The White House had previously proposed eliminating CDFI Fund support before Congress ultimately moved to fully fund the program for 2026 at $324 million in House legislation. As CUToday.info also reported, in its FY2027 budget proposal, the Trump Administration proposes cutting $204.5 million from discretionary awards for the CDFI Fund.
DCUC Responds
The Defense Credit Union Council said it supports safeguards that protect taxpayer resources and ensure federal programs operate with integrity and in full compliance with applicable law.
“CDFI-certified credit unions will want to get this right and that requires Treasury to work directly with us on clear, operational rules,” stated Jason Stverak, DCUC chief advocacy officer. “Rules that protect program integrity without disrupting lawful lending, while also ensuring that CDFI funds already approved for eligible financial institutions are released promptly; DCUC stands ready to meet with the Treasury team immediately to help shape workable guidance.”
In a letter to Bessent, DCUC urged Treasury to engage directly with CDFI-certified credit unions and other mission lenders during this process to clarify key definitions, verification standards, safe harbors, and transition timelines that allow institutions, especially small CDFI credit unions, to implement compliance controls responsibly and consistently.
DCUC also emphasized the importance of funding continuity for communities and service members’ families.
“When awardees have satisfied required closing steps and payment conditions, approved CDFI funds should move without unnecessary delay so credit unions can maintain lending and investment plans in underserved communities,” Stverak said.
CDFI Funds Set For Release
Separately, Inclusiv responded to reports that the Office Of Management and Budget is releasing FY 2025 CDFI funding ($289 million).
"The reports that OMB is poised to move forward with releasing FY25 funding are encouraging," Inclusiv stated. "The delay in unlocking CDFI funding is impacting the ability of CDFI credit unions to make life more affordable for their members. We are looking forward to official updates on award timelines and the status of FY 26 appropriations."
ACU's Position
“The release of these funds is critical for the communities and families that rely on CDFIs every day," said America’s Credit Unions President/CEO of Scott Simpson. "These awards, approved during the FY2025 funding round, can now move forward and begin delivering real impact. America's Credit Unions, leagues, Inclusiv, credit unions, and other industry partners were relentless in our advocacy for their release, both with members of Congress and the Administration, and we appreciate the bipartisan leadership that helped make this happen.
Simpson pointed out earlier budget proposals moved to eliminate funding for the CDFI Fund altogether.
"Instead, Congress reaffirmed its support for community-based lending and preserved critical resources that help people access affordable financial services," Simpson said. "At the same time, we are reviewing the new requirements tied to these awards. It is important that implementation supports, not complicates, the ability of these institutions to serve their communities. Today’s funding is welcome, but the work is not done. We will continue working with policymakers to ensure the CDFI Fund remains strong, stable, and focused on expanding opportunity in the Main Street communities that need it most.”