With the US government shutdown continuing, credit unions are scrambling to support members affected by salary suspensions – while the sector is itself facing cuts to the Community Development Financial Institutions (CDFI) Fund.
The Senate remains deadlocked over the federal budget, with Democrats withholding support and demanding an extension on tax credits for Affordable Care Act health plans, the reversal of Medicaid cuts, the restoration of public media funding and such as PBS and NPR restored curbs and president Trump’s use of the pocket rescission mechanism to bypass Congress for his spending cuts.
Around 40% of the federal workforce – about 750,000 people – are have been placed on unpaid leave, and Trump has taken advantage of the deadlock to lay off more than 4,000 workers across seven agencies.
These cuts include all CDFI Fund staff, a move which would effectively close the programme, which supports credit unions serving low-income and underserved areas through grants, certifications, and access to capital.
Earlier this month, the fund had announced its first round of FY2025 awards with US$8.8m in technical assistance grants. However, the government had already tampered with the fund, removing climate financing and diversity, equity and inclusion (DEI) from the list of permissible activities.
Inclusiv, the apex for US community development credit unions, stressed the importance of the fund in a statement on its website: “The CDFI Fund’s more than 30-year track record partnering with CDFI-certified credit unions, as well as certified loan funds, banks and venture funds, is unmatched in delivering vital, high-impact capital to spur economic development in low-income communities across the country.
“Catalyzing at least $8 in private funding for every federal dollar, the CDFI Fund has earned strong bipartisan support for its effective use of federal funds.”
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It warned: “Despite these achievements, the Trump administration has used the shutdown as a pretext to shut down the fund, as Reduction In Force (RIF) notices have been issued to all fund staff. This is not only improper, as the fund has a statutory mandate to fulfill, it is also incredibly shortsighted and harmful economic policy. It will reduce community lenders’ ability to provide the safe and affordable capital and financial services people and small businesses need during times of economic uncertainty and mounting financial distress.
“CDFI credit unions have played a vital role in supporting economic well-being in low-income, rural, urban and reservation-based communities, and the CDFI Fund must be allowed to continue its vital work to certify lenders and disburse Congressionally appropriated funding.”
More opposition to the cuts came from Defense Credit Union Council Chief Advocacy Officer Jason Stverak, who told CU Today: “Firing every CDFI Fund employee threatens the very communities CDFIs were created to serve.
“The Defense Credit Union Council strongly urges the Treasury Department to reverse this decision. CDFIs are lifelines for low-income, rural, and military families – and DCUC will continue leading the fight to protect them.”
Jim Nussle, CEO of America’s Credit Unions, said in a social media post: “Cutting this staff would effectively cease the operations of the fund and significantly impact CDFI credit unions and communities across the country. We urge Congress to swiftly come to an agreement on funding, and will monitor the RIF impact on credit unions and their members.”
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In a latter obtained by news outlet Politico, Treasury associate chief human capital officer Michael Wenzler said the move was “necessary to implement the abolishment of the CDFI, which is based upon the Department of the Treasury determination that its programmes, projects, and activities do not align with the president’s priorities”.
Meanwhile, credit unions been outlining their actions to support members affected by pay and services suspensions.
Apex body America’s Credit Unions warned: “When paychecks are suddenly put on hold, like during a government shutdown, families are left scrambling to cover everyday expenses. The stress isn’t just about dollars and cents.
“It’s about making sure children are fed, rent is paid, and health isn’t put at risk. In moments like these, credit unions, driven by their mission of people helping people, often look for opportunities to step in with compassion, flexibility, and solutions that remind members they aren’t facing hardship alone.”
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Services offered by credit unions during the crisis include financial counselling, personalised loan products that include reduced or no interest payroll advances; loan modifications such as interest reductions or payment holidays; and outreach to potential new members.
“Because our mission is centered on serving people, our federal tax exemption allows us to reinvest more directly into our members through programs, loans, and favourable rates that ease financial burdens when hardship strikes,” said Members First Federal Credit Union president and CEO Michael Wilson. “We are not looking at the bottom line; we are looking at how to support our member-owners. Our co-operative model, paired with this unique structure, positions us to step in with meaningful, people-first solutions.”
The situation is acute for credit union members in Washington DC and its metropolitan areas, where there are hundreds of thousands of federal employees.
MD|DC Credit Union Association told America’s Credit Unions it is engaging with federal, state, and local governments to explore ways credit unions can help.
“As it started to look like a shutdown was really going to happen, our credit unions didn’t hesitate, they mobilized quickly, putting assistance programmes in place to help members,” said president/ CEO John Bratsakis. “We heard from the Maryland governor’s office and from members of our congressional delegation who were looking for information to share with impacted constituents.
“Though our advocacy work and the trusted relationships that we have built – along with America’s Credit Unions and the League system, policymakers know credit unions are on the front lines, ready to help, especially in challenging times. From day one – even hour one – credit unions were putting members first. That’s what credit unions do every day.”
Efforts by individual credit unions include the introduction of special assistance resource for federal workers, by Valley Strong Credit Union in Kern County, California.
“At Valley Strong, we recognise the urgent financial challenges some of our Members face during a government shutdown,” said president/CEO Nick Ambrosini. “Our federal employee assistance resources are designed to provide reassurance and support, offering relief options such as 0% interest loans and deferred payments to help our members bridge the gap in uncertain times. We remain committed to standing by the communities we serve, ensuring they have access to the resources they need.”
AmeriCU Credit Union, based in Rome, New York, has military and government members across its 24 counties. It has rolled out 0% APR loans, fee and penalty relief, penalty-free loan postponements, the ability to skip loan payments, and penalty-free share certificate withdrawals.
“We have been here to support our members for 75 years, and this time of uncertainty is no different,” said Ron Belle, president/CEO. “We want to help lessen the strain as much as we possibly can.”
