Two-Thirds of Newly Eligible Credit Unions Now Have Low-Income Designation (Misc News: October 18, 2012)
Nearly 700 credit unions – with 31 of them in Michigan – have accepted the NCUA’s offer to designate them as low-income credit unions.
Two months ago, NCUA informed 1,003 federal credit unions that they could be designated as low-income credit unions simply by telling the agency that it was accepting the designation. Now, 676 have accepted. Those newly designated LICUs serve more than 7.7 million members and manage $66 billion in combined assets.
The NCUA initiative is aimed at cutting regulatory red tape to expand the number of credit unions with the low-income designation.
Including all of the new acceptances, there are now 1,874 LICUs in the country.
“We have had a very positive response to our low-income credit union eligibility initiative. The initiative aims to put needed financial services and resources into the grassroots of the American economy,” NCUA board Chair Debbie Matz said. “Two-thirds of the newly identified eligible credit unions have accepted in the last two months. By streamlining the application process, we are expanding opportunities and access to capital for millions of credit union members.”
To qualify as a LICU, a majority of a credit union’s membership must meet low-income thresholds based on 2010 Census data. The low-income designation means a credit union:
- is eligible for the Community Development Revolving Loan Fund’s grants and low-interest loans;
- can obtain supplemental capital;
- is exempt from the 12.25 percent statutory cap on member business loans; and
- can accept nonmember deposits from any source.
Matz noted the NCUA initiative was part of President Barack Obama’s relief and recovery package to help 27 drought-stricken states. To date, 326 of the federal credit unions that accepted the LICU designation are headquartered in states affected by the drought. These credit unions represent 51 percent of new LICU assets and 52 percent of new LICU members.
Additionally, the overwhelming majority of new LICUs have less than $100 million in assets. More than 80 percent of the newly designated LICUs fall below the $100 million threshold, and the median asset size of new LICUs is $23.8 million.
The LICU designation is currently open to just federally chartered credit unions, but NCUA is working with state regulators to allow state charters to instantly obtain the LICU designation.