Question PM27 asks Applicants to describe certain features related to any NSF fees their customers may be charged. If an Applicant charges NSF fees that can exceed the amount of the item returned unpaid (see PM27.2a), or charges NSF fees more than once for the same transaction, regardless of whether the item is re-presented (see PM27.4a), it must explain how such practices should be considered consistent with an acceptable community development mission.

The current standards for responsible financing practices allow for certain circumstances under which an otherwise disqualifying practice might serve an acceptable community development purpose. For example, Applicants that offer consumer loans that exceed an MAPR of 36% may still be determined eligible for certification if certain conditions are met, such as a default rate no greater than 5%, limits on fees to refinance the loan, substantially equal loan payments that amortize to a zero balance, among other conditions.

The CDFI Fund’s regulations state that a “CDFI shall be an entity whose predominant business activity is the provision, in arms-length transactions, of Financial Products and/or Financial Services.”⁷ To be predominant, the provision of Financial Products and/or Financial Services does not have to be the majority of the Applicant’s overall activity, but must be the activity that reflects the greatest use of the Applicant’s assets and staff time when compared to any other separate and distinct type of activity in which the Applicant engages.

An Applicant or Certified CDFI may disregard grant funds provided through a Federal, State government, or municipal community development-focused or public assistance program for the purposes of the Financing Entity predominance test if the following conditions are met:

Consistent with CDFI Fund regulations, Development Services are not considered as assets or staff time that support the direct provision of Financial Products and/or Financial Services. However, Applicants may disregard staff time dedicated to the provision of Development Services when calculating their predominant activity.

The CDFI Fund may allow a Certified CDFI to maintain its certification status by demonstrating compliance with the predominance test over a three-year fiscal period through the last day of its most recently completed fiscal year.

To become a Certified CDFI, an Applicant must demonstrate that it serves at least one eligible Target Market (either an Investment Area or a Targeted Population) through its Financial Products and/or Financial Services activity (see Question 43 of this FAQ) in its proposed Target

A Depository Institution that has directed less than 60% but at least 50% of either the dollar volume or the total number of its Financial Products to one or more eligible Target Market(s), also has the option of meeting the Target Market test by demonstrating that at least 60% of its total unique depository account⁹ holders are members of one or more eligible Target Market(s) AND that it delivers to one or more eligible Target Market(s) at least:

A unique depository account holder is an individual or other legal entity, other than a government entity, that can be identified through the use of a unique identifier - such as a Taxpayer Identification Number; a passport number and country of issuance; an alien identification card number; or a number and country of issuance of any other government-issued document evidencing nationality or residence and bearing a photograph or similar safeguard – and that holds a depository account (e.g., share, checking, certificates of deposit, money market) at a depository institution.

A Depository Institution Applicant that chooses to meet the Target Market test using the Financial Services option must demonstrate that at least 60% of its total unique depository account holders are members of a Target Market, regardless of when the account holder opened their first depository account with the Applicant.