Notice2022-16143
Minority Lending Institution Designation Criteria
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
July 28, 2022
Issuing agencies
Treasury DepartmentCommunity Development Financial Institutions Fund
Abstract
The Community Development Financial Institutions Fund (CDFI Fund) at the Department of the Treasury requests comments from the public regarding the criteria to designate a certified Community Development Financial Institution (CDFI) as a Minority Lending Institution (MLI). Unless otherwise noted, capitalized terms found in this notice are defined in the regulations that govern the CDFI Program.
Full Text
<html>
<head>
<title>Federal Register, Volume 87 Issue 144 (Thursday, July 28, 2022)</title>
</head>
<body><pre>
[Federal Register Volume 87, Number 144 (Thursday, July 28, 2022)]
[Notices]
[Pages 45399-45401]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-16143]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Community Development Financial Institutions Fund
[CDFI-2022-0001]
Minority Lending Institution Designation Criteria
ACTION: Notice and request for comment.
-----------------------------------------------------------------------
SUMMARY: The Community Development Financial Institutions Fund (CDFI
Fund) at the Department of the Treasury requests comments from the
public regarding the criteria to designate a certified Community
Development Financial Institution (CDFI) as a Minority Lending
Institution (MLI). Unless otherwise noted, capitalized terms found in
this notice are defined in the regulations that govern the CDFI
Program.
DATES: Written comments must be received on or before November 25, 2022
to be assured of consideration.
ADDRESSES: You may submit comments via the Federal eRulemaking Portal:
<a href="http://www.regulations.gov">www.regulations.gov</a>. Follow the instructions on the website for
submitting comments. In general, all comments will be available for
inspection at <a href="http://www.regulations.gov">www.regulations.gov</a>. Comments, including attachments and
other supporting materials, are part of the public record. Do not
submit any information in your comments or supporting materials that
you consider confidential or inappropriate for public disclosure.
For further information, contact Jeff Merkowitz, Senior Advisor,
CDFI Fund, 1500 Pennsylvania Avenue NW, Washington, DC 20220 or by
email at <a href="/cdn-cgi/l/email-protection#5c3130351c3f383a3572282e393d2f723b332a"><span class="__cf_email__" data-cfemail="7b1617123b181f1d12550f091e1a08551c140d">[email protected]</span></a>. Other information regarding the CDFI Fund
and its programs may be obtained through the CDFI Fund's website at
<a href="http://www.cdfifund.gov">www.cdfifund.gov</a>.
SUPPLEMENTARY INFORMATION: Pursuant to section 523 of Division N of the
Consolidated Appropriations Act, 2021, Public Law 116-260 (the Act), an
MLI is a CDFI that (i) directs a majority of its financial products to
minority populations or communities; and (ii) either (a) is a Minority
Depository Institution (MDI) or (b) demonstrates accountability to
Minority populations. Although no federal funding will be associated
with an MLI designation at this time, the CDFI Fund seeks to implement
the designation for those CDFIs that wish to be recognized for their
high levels of service and accountability to Minority populations, as
well as to identify barriers such CDFIs experience in providing access
to capital. A list of designated MLIs will be made available to the
public via the CDFI Fund website.
Through this request for comment, the CDFI Fund seeks feedback from
the public on certain aspects of the criteria and process the CDFI Fund
will use to designate a CDFI as an MLI, as listed in Section I. The
CDFI Fund also seeks any additional information beyond these questions
that members of the public believe would assist the CDFI Fund in
establishing policies and procedures related to MLI designation. The
CDFI Fund will consider the feedback received through this request for
comment prior to establishing a final definition and designation
process.
I. Definitions
A. Minority: The Act defines the term ``minority'' as ``any Black
American, Hispanic American, Asian American, Native American, Native
Alaskan, Native Hawaiian, or Pacific Islander.'' For purposes of
designating an MLI, the CDFI Fund proposes to rely on the following
definitions established by the 1997 Office of Management and Budget
(OMB) standards on race and ethnicity:
1. Native American/American Indian or Alaska Native. A person
having origins in any of the original peoples of North and South
America (including Central America), and who maintains tribal
affiliation or community attachment.
2. Asian. A person having origins in any of the original peoples of
the Far East, Southeast Asia, or the Indian subcontinent including, for
example, Cambodia, China, India, Japan, Korea, Malaysia, Pakistan, the
Philippine Islands, Thailand, and Vietnam.
3. Black or African American. A person having origins in any of the
black racial groups of Africa.
4. Hispanic or Latino. A person of Cuban, Mexican, Puerto Rican,
South or Central American, or other Spanish culture or origin,
regardless of race.
5. Native Hawaiian or Other Pacific Islander. A person having
origins in any of the original peoples of Hawaii, Guam, Samoa, or other
Pacific Islands.
Because of the Act's requirement to include ``any'' members of the
listed Minority populations, this definition differs slightly from some
of the definitions for Native populations used by the CDFI Fund in its
other programs, most significantly in the absence of any residential
requirement for Native Alaskans or Native Hawaiians. For example, for
Target Market purposes and as part of the Native Initiatives program,
the CDFI Fund recognizes the following Other Targeted Populations:
``Native American/American Indian
[[Page 45400]]
with maintained tribal affiliation or community attachment, Native
Alaskan residing in Alaska with maintained tribal affiliation or
community attachment, Native Hawaiian residing in Hawaii.''
B. Majority-Minority Census Tracts: For purposes of designating an
MLI, the CDFI Fund proposes to define a Majority-Minority Census Tract
as those census tracts or equivalents in which the sum of the tract's
non-duplicative population of Minority persons is greater than 50% of
the census tract's total population, as determined by the U.S. Census
Bureau and identified by the CDFI Fund on its website in the table of
all census tracts or equivalents that meet this definition based on the
2011-2015 American Community Survey (ACS) (see <a href="https://www.cdfifund.gov/documents/geographic-reports">https://www.cdfifund.gov/documents/geographic-reports</a>). The census data upon
which the CDFI Fund proposes to rely for this purpose will be updated
periodically based upon the most recent decennial census or, for a mid-
decade update, using the five-year ACS. At this time, the CDFI Fund
anticipates that it will implement the use of the 2016-2020 ACS data by
the end of the 2022 calendar year.
1. Are the proposed definitions of ``Minority'' and ``Majority-
Minority Census Tracts'' appropriate for the purposes of designating an
MLI?
II. Designation Criteria
In accordance with the Act's definition of MLI, the CDFI Fund is
considering the following criteria to designate a CDFI as an MLI.
A. CDFI Status: To receive the MLI designation, the Act requires
that an entity be certified as a CDFI, meaning that the entity must
meet all applicable CDFI certification requirements. CDFI certification
application requirements and supplemental information can be found on
the CDFI Fund website at <a href="https://www.cdfifund.gov/programs-training/certification/cdfi">https://www.cdfifund.gov/programs-training/certification/cdfi</a>.
B. Financial Products Directed to Minorities and Majority-Minority
Census Tracts: To fulfill the statutory requirement that a majority of
an MLI's financial products are directed at Minorities or Majority-
Minority Census Tracts or equivalent, the CDFI Fund proposes to seek
evidence that an applicant has directed greater than 50% of both the
number and dollar volume of its arm's-length, on-balance sheet
Financial Products to Minorities (including minority-owned businesses)
or Majority-Minority Census Tracts over the most recently completed 36
months upon initial designation, and on a three-year rolling average
over each subsequent, completed fiscal year to maintain the MLI
designation. Entities with less than three years of financing activity
will be measured based upon the full history of their financing
activity.
1. Is a rolling 36-month period the appropriate length of time to
assess an applicant's track record of serving Minorities or Majority-
Minority Census Tracts for the purposes of designating a CDFI an MLI?
Should the CDFI Fund instead require applicants to meet this
requirement using some other time period, either upon initial
designation or to maintain the designation? If yes, what is an
appropriate time period?
2. The Act requires that an MLI must direct a majority of its
financial products ``at minorities or majority-minority census tracts
or equivalents.'' Should the CDFI Fund assess Financial Products
delivered to legal entities that are not owned or controlled by
Minority individuals to finance projects such as affordable housing,
child care centers, charter schools, or health centers that are not
located within a Majority-Minority Census Tract but whose end-
beneficiaries (e.g., customers, residents, or employees) are members of
a Minority population? If yes, how?
C. Accountability: In addition to the above criteria, the Act
requires that an MLI be a CDFI that is recognized as an MDI or meets
standards for accountability to minority populations as determined by
the CDFI Fund. The Act recognizes MDIs defined in section 308(b) of the
Financial Institutions Reform, Recovery, and Enforcement Act of 1989
(12 U.S.C. 1463 note), or otherwise considered to be an MDI by the
appropriate Federal banking agency, as defined in section 3 of the
Federal Deposit Insurance Act (12 U.S.C. 1813), or by the National
Credit Union Administration, as applicable.
Under current practice, a CDFI must demonstrate accountability to
the Target Market it serves through representation on its governing
board or advisory board. For a CDFI serving a Minority Targeted
Population, a board member must be a member of that Minority population
to count towards the accountability requirements. When assessing
whether an advisory board provides accountability to Minority
populations, the CDFI Fund reviews each board member and also considers
the following factors: how often the advisory board meets (must be at
least bi-annually); how the advisory board members were selected; how
advisory board members obtain input from Minority populations; and how
the advisory board input is incorporated into the organization's
governing board's decision-making processes.
The CDFI Fund is considering whether non-MDI CDFIs seeking MLI
status should demonstrate accountability to Minority populations
through Minority representation on the CDFI's governing board or
advisory board. The CDFI Fund seeks comment on whether to require that
a majority of a CDFI's governing board members should be members of a
Minority population and whether CDFIs should have options to meet the
accountability standards through loan committees (committees delegated
authority by the governing board to approve or disapprove loan
applications) or a non-governing advisory board.
In addition, the CDFI Fund is considering whether to allow a CDFI's
executive staff to demonstrate accountability to Minority populations
for the purpose of an MLI designation. Currently, for CDFI
certification purposes, principals or staff members of an applicant
organization or its Subsidiaries, Affiliates, or investors, or whose
family members are principals or staff members, cannot be used to
demonstrate Target Market accountability, as it is considered a
conflict of interest.
For example, one approach could be for the CDFI Fund to establish
the following options to meet the accountability criteria for
designating an MLI.
Option One: Greater than 50 percent of the governing board or
ownership of an organization is made up of individuals who are members
of Minority populations;
Option Two: Between 33 percent and 50 percent of the governing
board or ownership of an organization is made up of individuals who are
members of Minority populations, and at least two of the following
additional criteria are met: the chief executive officer of the
organization is a member of a Minority population; greater than 50
percent of the executive staff, other than the chief executive officer,
are members of Minority populations; greater than 50 percent of the
loan committee members are members of Minority populations; and greater
than 50 percent of the organization's advisory board members are
members of Minority populations.
1. Should a majority (greater than 50 percent) of a CDFI's
governing board members be required to be members of Minority
populations to demonstrate accountability to Minority populations?
Specifically, the CDFI Fund requests comments on whether it should set
a standard higher than the 33 percent level proposed separately for
Native
[[Page 45401]]
CDFI designation and for general Target Market accountability as part
of the CDFI Fund certification standards (see <a href="https://www.cdfifund.gov/programs-training/certification/cdfi/certification-pra">https://www.cdfifund.gov/programs-training/certification/cdfi/certification-pra</a>).
2. Should there be options for CDFIs to meet the accountability
requirement through a lower threshold of Minority representation on a
CDFI's governing board? If yes, what level of representation is
appropriate?
3. Alternatively, is a standard of 33 percent Minority
representation for a CDFI's governing board members in combination with
66 percent for a CDFI's advisory board (with at least one governing
board member serving on the advisory board) appropriate to demonstrate
accountability to Minority populations?
4. Given the regulatory requirements for the governing board
composition of regulated financial institutions, as well as the absence
of governing boards for some privately held entities, should there also
be an option for non-MDI regulated entities or privately held entities
without a governing board to demonstrate accountability for the
purposes of MLI designation? If yes, what standard should be used?
5. Should the CDFI Fund allow a CDFI's principals or executive
staff (meaning all directors and executive officers vested with the
powers to manage and supervise the day-to-day affairs of an
organization) to demonstrate accountability to Minority populations,
either as an alternative to accountability through a governing board or
in combination with a lower threshold of representative governing board
members? If yes:
a. Which and how many of a CDFI's executive staff members should be
necessary to demonstrate accountability to Minority populations, and in
what combination with the CDFI's governing board?
b. The use of executive staff or principals to demonstrate
accountability to a Minority population may be undermined due to the
principal's or executive staff member's financial relationship to the
organization. Are there any appropriate safeguards to mitigate such a
conflict between the interests of a principal or executive staff member
and the Minority community to which they are to be accountable? If yes,
what are some safeguards?
6. Should the CDFI Fund allow the ownership of a CDFI to
demonstrate accountability to Minority populations, either as an
alternative to accountability through a governing board or in
combination with a lower threshold of representative governing board
members? If yes, should accountability mirror the MDI definition (i.e.,
51 percent or more of the voting stock is owned by minority
individuals) to be counted in determining minority ownership? If
ownership should be permitted to demonstrate accountability only in
combination with some level of governing board representation, what
should that threshold be?
7. Should the CDFI Fund allow the composition of a CDFI's loan
committees to demonstrate accountability to Minority populations,
either as an alternative to accountability through a governing board or
in combination with a lower threshold of representative governing board
members? If yes, how many members of a CDFI's loan committee should be
necessary to demonstrate accountability to Minority populations, and in
what combination with the CDFI's governing board?
8. If a CDFI serves multiple Minority populations, for purposes of
the MLI designation should it be required to have board or other
representation reflective of each of the Minority populations it
serves? If yes, how should the share of board or other representation
for each Minority population the CDFI serves be determined?
9. The CDFI Fund is also considering the relationship between the
standards for designation as an MLI and those for designation as a
Native CDFI. To what extent should the two align?
a. Should status as a Native MDI automatically qualify as an
accountability criterion for designation as a Native CDFI?
b. Should the status as a Native MDI automatically qualify as an
accountability criterion if the CDFI also serves other Minority
populations?
10. Should MLIs be able to demonstrate accountability through means
other than those identified above? If yes, how?
III. General Designation Questions for Public Comment
In addition to the questions above, the CDFI Fund welcomes public
comment on any aspect of the process or substance of the MLI
designation. Is there additional information that the CDFI Fund should
consider in the MLI designation process? If yes, please describe.
Authority: 12 U.S.C. 4701 et seq.; 12 CFR 1805; Public Law 116-260.
Jodie L. Harris,
Director, Community Development Financial Institutions Fund.
[FR Doc. 2022-16143 Filed 7-27-22; 8:45 am]
BILLING CODE 4810-05-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on July 28, 2022.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.