CFPB Investigating Community Lenders Targeted by Trump for Cuts

The Consumer Financial Protection Bureau is investigating several community lenders backed by a federal program the Trump administration is looking to slash, even as the program and its recipients enjoy significant bipartisan support for expanding economic opportunities in underserved areas.

The CFPB since last month has sent out “supervisory questionnaires” to at least four loan funds that are certified community development financial institutions, according to documents obtained by Bloomberg Law and multiple people familiar with the investigation who requested anonymity to discuss it.

The questionnaires went to loan funds that previously hadn’t been subject to CFPB supervision and were ordered by top political appointees at the bureau, the people said. It’s unclear how the CFPB questionnaires are linked to an investigation into CDFIs the Treasury Department announced last month, targeting what Secretary Scott Bessent called “predatory practices” affecting the very communities the lenders are intended to serve.

The federal probes aren’t the only hurdle confronting lenders backed by the Community Development Financial Institutions Fund.

The Office of Management and Budget has yet to approve notices of funds availability for three programs operated by the CDFI Fund, a Treasury Department office that provides grants and technical assistance to qualifying community banks, credit unions, and loan funds, according to multiple people with knowledge of the matter. The CDFI Fund can’t release the notices without OMB approval.

If those notices don’t go out soon, more than $500 million approved by Congress for use through September—mostly for a CDFI bond guarantee program—could be lost, the people said.

The Trump administration has repeatedly attempted to eliminate the CDFI Fund’s core programs. OMB Director Russell Vought, who also serves as the CFPB’s acting chief, has criticized the office for supporting a “woke” ideology.

The CFPB’s investigation and the administration’s delays in releasing funding applications have raised concerns that Trump officials are looking for ways to attack CDFIs even though Congress continues to back them.

Sen. Mark Warner (D-Va.), the co-chair of the bipartisan Senate CDFI Caucus, is “deeply concerned that politically motivated actions could devastate the communities CDFIs were created to serve, including those in need of capital investment, affordable housing, and economic mobility,” a spokesperson for the senator said in an email.

Sen. Mike Crapo (Idaho), the caucus Republican co-chair who has pushed back on previous Trump administration proposals to cut the CDFI Fund, didn’t respond to a request for comment.

Treasury, the CFPB, and OMB didn’t respond to detailed questions from Bloomberg Law.

Delayed Approvals

CDFIs look to deploy capital in communities that banks typically don’t serve. They operate in every state, and supporters say they provide a huge boost to underserved rural and urban communities.

Congress provided $324 million a year for the CDFI Fund in fiscal 2025 and fiscal 2026, rejecting the Trump administration’s request to slash nearly all federal funding for the office’s core programs in the current fiscal year and instead create a new $100 million fund targeting rural communities.

The GOP-led House Appropriations Committee last month approved a funding bill that would provide about $277 million for the CDFI Fund in fiscal 2027, once again largely ignoring the White House’s proposed cuts.

But the administration has found other ways to interfere with the funds, which expire if they aren’t disbursed by the end of a two-year cycle.

OMB waited until April to release $289 million appropriated for fiscal 2025 that’s set to expire by the end of September. And the administration so far hasn’t posted notices of funds availability for its $40 million Bank Enterprise Award Program, its $9 million Small Dollar Loan Program, and a separate program that can guarantee up to $500 million in bonds made available to recipients.

Without the notices, CDFIs can’t apply for the grants or bond guarantees, said Jeannine Jacokes, CEO of Partners for the Common Good, a CDFI loan fund that partners with other, smaller community lenders.

“We only have four months left in the federal fiscal year,” Jacokes, a former CDFI Fund official, said.

Even if the funding availability notices were released today, “it would be a very, very tight turnaround for the agency to get the money obligated in time,” she said.

Partners for the Common Good didn’t receive a supervisory questionnaire from the CFPB, according to multiple people with knowledge of the CFPB’s investigation.

Vought Target

Vought has publicly opposed CDFIs in general and their federal funding in particular.

“They continue to be pushing an ideology that is very harmful,” he said at a House Budget Committee hearing April 15.

The CFPB’s investigation comes as the agency has largely pulled back from other supervisory and enforcement efforts, said Adam Rust, the Consumer Federation of America’s director of financial services.

“It’s ideology over common sense, undoubtedly,” he said. “It’s not the right place to be looking for problems.”

‘Effectively Strangle’

After the White House released the fiscal 2025 funds, Bessent announced his department’s investigation into some CDFIs and also said Treasury was working on a rule that would bar community lenders who receive federal funds from supporting services for diversity efforts or for immigrants lacking necessary documentation.

Treasury’s investigation also followed the failure of subprime auto lender and car dealer Tricolor Holdings, which was a certified CDFI.

Tricolor, which was focused on Latino and other minority communities, allegedly issued fake loans and engaged in other predatory lending practices prior to its implosion last year.

Most CDFIs are small financial institutions that don’t have the resources to defend against a federal investigation, whether it comes from Treasury or the CFPB, and many will “fold,” said Todd Baker, a senior fellow at the Richman Center for Business, Law and Public Policy at the Columbia Business School. Baker also serves on the board of Accion Opportunity Fund, a certified CDFI that isn’t funded through the federal CDFI Fund.

“That appears to be the point of the exercise,” Baker said. “Effectively strangle the CDFI Fund without killing it.”