Community Bankers of Iowa Monthly Banker Update February 2014 | Page 19

Community Development Financial Institutions:
Written By: John E. Lande, Dickinson Mackaman Tyler & Hagen, PC

Increase economic development in your community
and ease your compliance burden at the same time!
On January 10, 2014, the Consumer Financial Protection
Bureau’s (“CFPB’s”) new Ability to Repay (“ATR”) and Qualified
Mortgage (“QM”) rules took effect. These rules impose new
burdens on financial institutions as they determine whether
consumers qualify for credit products.
However, Dodd-Frank and the 2009 Stimulus Act included
amendments to a program that can ease the new ATR
requirements and give banks tools to spur economic
development. These changes came to the program for
Community Development Financial Institutions (“CDFIs”).
They are part of an effort to spur economic development
in underserved areas. CDFIs are entities, often financial
institutions, that:

1. Have a primary, but not sole, mission of promoting
community development;
2. Serve a CDFI target market;
3. Provide development services in addition to financing;
and
4. Maintain accountability to their target market by either
including a member of the community (such as a
business owner) on the bank’s board, or creating an
advisory board.
One of the biggest advantages of becoming a CDFI for
community banks is the exemption from the CFPB’s new ATR
rules. Under the new ATR rules, consumers can commence
a lawsuit against a bank that fails to adhere to the ATR rules.
The ATR rules impose strict lim