To meet the CDFI Certification standards for responsible financing practices, an Applicant (and its Affiliates) should provide Financial Products and Financial Services that are consistent with promoting community development. Such Financial Products should not harm consumers, be affordable and originated based upon an assessment of whether a borrower is able to repay a loan and have terms and conditions that are transparent and understandable to the borrower. CDFIs should practice transparency, fair collections, and be in compliance with federal, state, and local laws and regulations. The CDFI Fund also considers the safety, affordability, and transparency of an Applicant’s Financial Services to be an important aspect of the Applicant’s commitment to its primary mission of community development.
Any Applicant that either directly or through an Affiliate engages in any of the following practices is ineligible for CDFI Certification:
- Originates or otherwise offers loans that exceed the interest limits that apply to non-depository institutions in the state where the borrower resides;
- Offers consumer loans that allow for a rate in excess of 36%, using the Military Annual Percentage Rate (MAPR) standard, and
- the loans have an annual default rate over five percent;
- the loans in question include a leveraged payment mechanism;
- any such loans of $1,000 or less have repayment timeframes that exceed 12 months;
- for a period of 12 full months after the issuance of any such loan, the Applicant does not waive any upfront fees for any refinance or new loan issued to the same borrower;
- of the loan or pro rata refundable in the event of early repayment (including through a refinance); or
- all payments on any such installment loans are not substantially equal and do not amortize smoothly to a zero balance by the end of the loan term;
- Offers certain single-family, owner-occupied, residential mortgage loan products secured by a non-subordinate lien:
- for which the Applicant fails to verify the income or assets of the borrower;
- that include negative amortization or interest-only payments;
- that charge upfront points and fees to the consumer in excess of 3%, or in excess of the Qualified Mortgage limits for smaller loans; or
- that are underwritten at less than the maximum rate in the first five years;
- Sells its charged off consumer or small business debt to debt buyers;
- Has a current Community Reinvestment Act rating below Satisfactory;
- Uses its Equity Investment Financial Products to gain Control over an investee (except if the Applicant must save a business through ownership as a last resort for a limited period of time); or
- Leverages, for its own benefit, the assets of any of its active equity investees.
In addition, an Applicant may also be determined to be ineligible for CDFI Certification for engaging in any of the following practices, unless the Applicant provides an acceptable explanation of how the practices are consistent with a community development mission:
- Does not evaluate the ability of certain mortgage, consumer, or small business borrowers to pay back a loan;
- Offers small business4 loans that allow for an APR in excess of 36%, using the Truth in Lending Act (TILA) methodology in 12 CFR § 1026 (Regulation Z);
- Offers certain mortgages with balloon payments or that carry an original maximum term longer than 30 years (unless offered through a government program); or
- Charges excessive overdraft or nonsufficient funds (NSF) fees or have practices that are related to these fees that are harmful.
Other questions provide Applicants an opportunity to further demonstrate community development intent, such as how they assist struggling borrowers. Depository institution Applicants must also provide information on checking or share account features they offer.
Beginning January 1, 2026, new Applicants that offer small business loan products that do not disclose in writing the periodic payment due, the total amount to be repaid over the life of the loan, the total finance charges over the life of the loan, and APR of the loan will be ineligible for CDFI Certification. Certified CDFIs that offer small business loan products will be required to attest in their Annual Certification and Data Collection Report (ACR) to making such disclosures no later than October 1, 2026, in order to maintain their Certification.
(See Question 37 of this FAQ on seeking an amendment to any of the standards for responsible financing practices.)
4 For purposes of CDFI Certification, "small business” has the same meaning as the term “small business concern” in 15 U.S.C. 632(a), as implemented in 13 CFR § 121.101 through 121.107. Notwithstanding the size standards set forth in 13 CFR § 121.201, for purposes of this subpart, a business is a small business if its gross annual revenue, as defined in 12 CFR § 1002.107(a)(14), for its preceding fiscal year is $5 million or less.