Military credit union group urges Congress to fund CDFIs

Annabelle Gordon/Bloomberg

Advocates for military credit unions Tuesday urged top lawmakers on a senate appropriations subcommittee to restore funding for the Community Development Financial Institutions Fund, after the White House proposed eliminating new funding. 

In the letter, addressed to Financial Services and General Government Subcommittee Chair Bill Hagerty, R-Tenn., and Ranking Member Jack Reed, D-R.I., the Defense Credit Union Council urged lawmakers to support the fund given its historically bipartisan backing and the services it provides veterans and other underserved communities. 

"We are alarmed by any efforts to zero out or sharply reduce CDFI Fund support," DCUC wrote. "As such cuts would have a devastating impact on military-serving credit unions and the communities they serve, undermining decades of progress in financial inclusion for our nation's heroes."

The CDFI Fund — established by the Riegle Community Development Regulatory Improvement Act of 1994 — supports financial institutions that serve economically distressed communities. The fund certifies financial institutions that focus on financial inclusion as CDFIs, among them banks, credit unions, nonprofit loan funds, microloan funds and venture capital funds. 

CDFIs provide affordable lending and financial services to underserved communities, particularly in remote areas that may not have access to major banking institutions. Credit unions have often used CDFI grants to open branches in banking deserts, providing a "lifeline" to underserved groups, including junior enlisted service members, according to DCUC. 

"Cutting the CDFI Fund would push military families back toward predatory lenders and stall decades of progress in financial inclusion," the group wrote. "These grants are not a handout — they are high-impact investments in national economic stability and family financial readiness."

President Trump targeted the CDFI Fund — along with a number of agencies deemed overly progressive — for budget cuts in a March executive order as part of his administration's broader initiative to reduce the size of federal government spending. The order called on his administration officials to "reduce the performance of their statutory functions and associated personnel to the minimum presence and function required by law" as well as "reject funding requests for such governmental entities to the extent they are inconsistent with this order."

In the first Trump administration, the president also proposed deep cuts to the CDFI Fund's budget in annual budget proposals, citing concerns about the federal government's role in subsidizing financial activities that could be handled by the private sector.

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The order has stoked consternation with community lending advocates, a rare area of overt disagreement between the administration and the banking industry. Community banking trade group the Independent Community Bankers of America wrote to Treasury Secretary Scott Bessent and lawmakers urging them to uphold the public-private program which has long supported community lenders. Over 90% of congressional districts rely on CDFIs to some extent and for every dollar the government invests, CDFIs leverage $8 in private sector investment according to the ICBA.

In March, Virginia Democratic Senator Warner and Sen. Mike Crapo, R-Idaho — co-chairs of the Senate Community Development Finance Caucus and influential members of the Senate Banking Committee — reaffirmed bipartisan support for the fund and its mission. 

"Since 1994, the CDFI sector has grown to over 1,400 institutions, located in every state and territory in the nation — and leveraging at least $8 in private sector investment for every $1 in public funding received," the senators wrote in a statement. "As co-chairs of the Community Development Finance Caucus, a group which has grown to 28 members, 14 Democrats and 14 Republicans, we are proud to reaffirm our bipartisan commitment to support the CDFI Fund's mission."