Remarks by Deputy Assistant Secretary Milano at the National Federation of Community Development Credit Unions' 5th Annual CDFI Credit Union Roundtable

Good afternoon and thank you, for inviting me to participate in today's panel. I'm very excited Cathie asked me to speak today about how Treasury is working to increase financial access and opportunity for all Americans. Community development credit unions are integral to the mission of the CDFI Fund. As full service financial institutions, you offer not only vitally needed credit, but banking services in areas that have been traditionally underserved. And for that I applaud and thank you.

In my role as Deputy Assistant Secretary for Small Business, Community Development, and Affordable Housing, it is my job to support the priorities of Treasury Secretary Lew through our community development and small business programs and partnerships. Last month, at one of the country's largest convenings dedicated to financial empowerment, Treasury Secretary Lew reinforced the Administration's desire to continue our progress in connecting the millions of Americans who are currently excluded from our financial system to make sure that they have the tools they need to cash a paycheck, save for an unexpected expense, and build a secure financial future.

According to the FDIC's National Survey of Unbanked and Underbanked Households, 1 in 13 households in the United States were unbanked in 2013. This proportion represented nearly 9.6 million households. So how do we do this? How do we connect people to the financial products and services they need?

First, every community that needs a CDFI should have access to one. One way to achieve this is through partnerships like the Treasury/ NCUA partnership Bill just talked about. The agreement signed by Treasury and NCUA sets a very ambitious goal to double the number of CDFI-certified low-income credit unions by the end of this year. We plan to do this by working together to streamline the application process for low-income credit unions to be certified as CDFIs by enabling credit unions to use the data already collected by the NCUA as part of the CDFI certification process, rather than having to collect it again, so you can spend more time serving your customers and less time filling in paperwork. This will streamline the process for applying for certification and accessing CDFI Fund programs.

But why should we stop there? Well, we shouldn't. That's why Treasury is also exploring this model with the bank regulators to help more community banks serving low-income communities become CDFIs. With CDFI certification, financial institutions can access training and competitive award programs provided by the CDFI Fund, and these resources can aid these institutions' capacity to provide under-served communities with access to safe and affordable financial services.

But expanding our reach to more communities is just one piece of the puzzle. We also need to make our programs work better for CDFIs and the populations they serve. That's why Annie and I are also working to make some common sense changes to the CDFI Program to help our resources go even further.

The CDFI Fund has awarded more than $2 billion in grant funding to local community financial institutions all over the country. This money is leveraged many times over by CDFIs to create an even greater impact in the communities they serve. While we are proud of the work the CDFI Fund has achieved, we recognize that there is still more work ahead to reach individuals who lack access to financial services in so many communities in our country.

The CDFI Program is the primary way the CDFI Fund builds the capacity of CDFIs to serve low-income people and communities that lack access to financial products and services. Generally, financial assistance awards may be used by CDFIs to develop or support a number of activities including: commercial facilities that promote revitalization, community stability, or job creation or retention; businesses that provide jobs for low-income people or enhance the availability of products and services to low-income people; community facilities; housing that is principally affordable to low income people; and the provision of basic financial services. However, over the last 20 years, we've found that program funding has primarily been used to support community development lending and real-estate backed projects.

While that part of community development is vital and important, we need to emphasize the many ways CDFI Program funding can be used to fulfill the intent of the statute and assist all CDFIs to serve their investment areas or target populations. That's why we are revamping the Fiscal Year 2017 application in order to foster a more diverse pool of applicants and uses of funds.

The CDFI Fund will implement a number of changes to the CDFI Program that will encourage greater diversity in the use of financial assistance awards, specifically those that increase the availability and utilization of banking services for unbanked and underbanked populations. Lending and retail financial services create and promote financial inclusion for individuals and small businesses and we want to make sure that all types of CDFI programs and services are supported with program funding.

In addition, Treasury has the ability to encourage institutions to work together toward a common goal of strengthening our communities. The CDFI Fund statute specifies that community partnerships can be formed to expand lending and investment into low income areas. We are emphasizing that mechanism of the program by raising awareness that CDFIs can partner with retail financial institutions to offer much-needed services. We are also emphasizing the ways awards can be used for financial inclusion. We hope that with outreach and training, community partnerships between CDFIs, non-profits, community organizations and even mainstream financial institutions will be formed in order to increase the depth and reach of CDFIs.

Finally, I'll mention the President's 2017 budget. This year's budget proposes a new Small Dollar Loan program to help all CDFIs banks, loan funds and credit unions - address the issue of predatory lending in their communities and provide an alternative to payday lenders. This program will provide grants to CDFIs to establish loan loss reserves and provide technical assistance to establish small dollar loan programs. This support will make it easier for these institutions to provide safe and affordable alternatives to predatory lenders.

Thank you for your continued support of the CDFI Fund and I look forward to continuing to work with the NFCDCU and the NCUA to engage your industry in this important work.

Jessica Milano is the Deputy Assistant Secretary for Small Business, Community Development, and Housing at the U.S. Department of the Treasury.

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