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Cooperative Ext. Service FCU: Low-income Families Need CUs the Most
Monday, August 11, 2014 7:00 AM

Two years after the National Credit Union Administration announced its low-income credit union initiative, 2,107 federally insured credit unions now have the low-income designation, the agency said Friday. Cooperative Ext. Service FCU is one of those credit unions.

Kim Wiedower, CEO of the Little Rock, Ark.-based credit union, says the credit union was not granted the low-income designation on its first try. But then after the NCUA streamlined the application process, the credit union was approved.

“There are a significant number of low-income residents within our field of membership, and these are the people who need us the most,” notes Wiedower. “Unfortunately, many have turned to predatory financial service providers. As a result, the people that can least afford it are the ones paying a premium price for basic financial services.”

Having the low-income designation, Wiedower says she now has access to grant dollars that will help the credit union develop new services and programs to better serve current and future members.

According to NCUA Chair Debbie Matz, low-income credit unions are often the only insured depository institutions serving low-income and underserved areas. They provide affordable financial services and make investments to help stabilize communities and encourage growth. They promote financial security as a source of capital for small businesses and by providing loans that help members purchase homes, buy cars or send children to college.

Together, low-income credit unions have 23.6 million members and $218 billion in assets. More than 70 percent of the low-income designated credit unions are also small credit unions, with assets of less than $50 million.

“NCUA introduced the low-income credit union initiative two years ago as part of my Regulatory Modernization Initiative,” Matz said. “This was a significant easing of a regulatory burden for those credit unions that were eligible for the designation. These credit unions have expanded access to affordable financial services to low- and moderate-income members, developed financial literacy programs and increased their own service capacity through staff training.”

To qualify as a low-income credit union, a majority of a federal credit union’s membership must meet low-income thresholds based on 2010 Census data. The designation offers several benefits to credit unions, including:

  • An exemption from the statutory 12.25 percent cap on member business lending, which expands access to capital for small businesses and helps credit unions diversify portfolios.
  • Eligibility for Community Development Revolving Loan Fund grants and low-interest loans.
  • Eligibility for nomination for free NCUA consulting.
  • Ability to accept deposits from non-members.
  • Authorization to obtain supplemental capital.

In addition to making the designation process easier, NCUA has provided grants from the Community Development Revolving Loan Fund for training, collaboration and new product and service development; coordinated with the National Association of State Credit Union Supervisors to help state-chartered credit unions determine their eligibility to become a low-income credit union; and provided information, including three webinars on strategic issues for serving low-income credit union members.

A fact sheet on the benefits of the low-income credit union designation is available online here.