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NCUA's Low-Income Credit Union Initiative Boosts Growth, Community Investment
Thursday, August 8, 2013 7:35 AM

One year after the National Credit Union Administration (NCUA) announced its low-income credit union initiative, the number of designated credit unions has grown significantly, creating the potential for greater community investment and access to financial services in underserved communities, Board Chairman Debbie Matz announces.

“We launched NCUA’s low-income credit union initiative one year ago, as part of my Regulatory Modernization Initiative,” Matz said. “To relieve federally chartered credit unions of the burden of determining if more than 50 percent of their members met the definition of low income, NCUA performed the analysis and then informed the qualifying credit unions. Since last August, 821 federally insured credit unions, with 11 million members and $101.8 billion in assets, have accepted the low-income designation. There are now 1,961, two-thirds of which are federal credit unions, with the low-income designation. The most recent data show these credit unions have 17.8 million members and assets of $157.6 billion. By streamlining the designation process, we have been helping more credit unions help more people.”

Low-income credit unions are often the only insured depository institutions serving low-income and underserved areas. Their investments help stabilize those communities and encourage growth. They promote financial security by providing capital to small businesses so they can create jobs and loans enabling members to purchase homes or send children to college.

Matz announced the initiative Aug. 7, 2012. The agency sent letters to more than 1,000 federal credit unions, notifying them of their eligibility and informing them of the streamlined application process, essentially pre-qualifying them for the low-income designation and asking if they would like to accept.

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;
  • Ability to accept deposits from non-members; and
  • Authorization to obtain supplemental capital.

More than 70 percent of the low-income designated credit unions are also small credit unions, with assets below $50 million.

Since beginning the initiative, the agency has taken several other steps to support low-income credit unions, including:

  • Providing more than $1 million in grants from the Community Development Revolving Loan Fund for training, collaboration and new product and service development.
  • Working with the National Association of State Credit Union Supervisors to help state-chartered credit unions more easily determine low-income designation eligibility.
  • Hosting a webinar on strategic issues for serving low-income credit union members.

Credit unions will find more information about the benefits of the low-income credit union designation on the NCUA’s website.