CFPB Investigates Community Development Loan Fund Lenders

As Bloomberg Law reported Tuesday (May 26), that’s a program that President Donald Trump’s administration is seeking to slash, despite strong bipartisan support.

The report, citing documents obtained by Bloomberg and multiple sources familiar with the investigation, said the Consumer Financial Protection Bureau (CFPB) issued  “supervisory questionnaires” last month to at least four loan funds that are certified CDFIs.

These loan funds hadn’t been subject to CFPB supervision, with the questionnaires ordered by top political appointees at the bureau, the sources said.

Bloomberg added that it’s not clear how the CFPB questionnaires are connected to an investigation into CDFIs the Treasury Department announced last month.

“CDFIs play a critical role in expanding access to capital in underserved communities,” Treasury Secretary Scott Bessent said in the announcement. “CDFIs that engage in predatory practices and take advantage of the very communities they are intended to serve will be reviewed and, where appropriate, held accountable.”

At the same time, the White House is moving to cut $204.5 million from the CDFI fund, a 63% reduction. The fund is designed to promote economic opportunity in underserved communities by backing mission-driven financial institutions that offer capital and services to people and businesses who are in many cases overlooked by traditional lenders.

However the Trump administration said that under past presidencies the fund was “abused” to service “partisan agendas.”

“Past awards enabled lender practices in which race was a key determinant in access to loans, and provided funds for products and services that advanced immigration, gender, and climate radicalism,” the budget read.

The Bloomberg report noted that Russell Vought, acting head of the CFPB and director of the Office of Management and Budget (OMB), has criticized the CDFI program for supporting a “woke” ideology.

Lawmakers and banking groups have spoken out against the proposed cuts. America’s Credit Unions, for example, issued a statement last month saying that the budget proposal would deny communities access to reliable and affordable financial services.

Meanwhile, a pair of U.S. Senators introduced legislation in February they say would help the CDFI fund boost capital access and economic development in underserved communities.

Sen. Mark Warner, one of the bill’s sponsors, issued a statement to Bloomberg saying he was “deeply concerned that politically motivated actions could devastate the communities CDFIs were created to serve.”