By David Hood-Nuño
WASHINGTON, Sept 21 (Reuters) - A business advocacy group representing government-backed community lenders sued the U.S. Treasury Department on Monday, seeking to prevent nearly $300 million in federal grants from expiring at the end of the month.
The Washington-based Freedom Economy Business Association filed the suit in U.S. District Court for the District of Columbia, arguing the Treasury unlawfully failed to distribute fiscal year 2025 funding approved by Congress for Community
Development Financial Institutions, or CDFIs. Because Congress appropriated the funds and CDFIs lawfully applied for them, they should be distributed, it said.
The Treasury Department did not respond to a request for comment.
CDFIs are specialized lenders that provide financing to small businesses, affordable housing projects, health clinics and other community initiatives that often lack access to traditional sources of capital.
The Treasury certifies CDFIs and distributes grants authorized annually by Congress. The vast majority of CDFIs do not take deposits, meaning gvernment funding is a critical lifeline.
While Treasury announced awards on September 15, it has not identified recipients or obligated the funds, leaving the money at risk of expiring when the fiscal year ends on September 30, Freedom Economy said.
The group has asked the court to order Treasury and the Office of Manaagement and Budget to distribute funds before the deadline and to move forward with an additional $289 million appropriated by Congress for fiscal year 2026.
It also asked the court for a temporary restraining order to immediately prevent Treasury from "running out the clock," according to Alphonso David, CEO of the Global Black Economic Forum and lead counsel in the case.
The Trump administration last year said the organizations promoted a "partisan agenda," "gender extremism" and "climate radicalism," claims they deny.
The funding delay led one CDFI to shutter and further delays could cause more to close, community lenders have warned.
CDFIs have laid off staff, downsized operations and accrued debt, Tynesia Boyea-Robinson, chair of Freedom Economy, told reporters at a press conference.
"Many of our members are unable to serve the millions of people relying on them," she said. "This is all because the federal government has refused to follow the law and meet their obligations under the law."
The group expects a response from the courts within 48 hours, David said.
(Reporting by David Hood-Nuño; editing by Michelle Price and Cynthia Osterman)
