Credit Union Low-Income Designation
How to qualify for or maintain a low income designation, and benefits like secondary capital, insured non-member deposits, and streamlined CDFI application.
A credit union serving predominantly low-income members may be designated as a low-income credit union. Section 701.34 of NCUA’s Rules and Regulations defines the term “low-income members” as those members:
- who make less than 80 percent of the average for all wage earners as established by the Bureau of Labor Statistics; or
- whose annual household income falls at or below 80 percent of the median household income for the nation as established by the Census Bureau.
The term “low-income members” also includes members who are full-time or part-time students in a college, university, high school, or vocational school.
A credit union with a low-income designation has greater flexibility in accepting nonmember deposits insured by the NCUSIF, are exempt from the aggregate loan limit on business loans, and may offer secondary capital accounts to strengthen its capital base. It also may participate in special funding programs such as the Community Development Revolving Loan Program for Credit Unions (CDRLP) if it is involved in the stimulation of economic development and community revitalization efforts.
The CDRLP provides both loans and grants for technical assistance to low-income credit unions. The requirements for participation in the revolving loan program are in Part 705 of the NCUA Rules and Regulations. Only operating credit unions are eligible for participation in this program.
OBTAINING A LOW-INCOME DESIGNATION
To obtain a low-income designation from NCUA, an existing credit union must establish that a majority of its members meet the low-income definition. Typically this is achieved based on data obtained through examinations. NCUA will notify a federal credit union that it qualifies for designation as a low-income credit union if a majority of its membership (50%+1) qualifies as low-income members. However, an existing community credit union that serves a geographic area where a majority of residents meet the annual income standard is presumed to be serving predominantly low-income members. Additionally, a low-income designation for a new credit union charter may be based on a majority of the potential membership.
A federal credit union that wishes to receive the designation must notify NCUA in writing within 90 days of receipt of any NCUA notifications. Also, if NCUA determines in a subsequent exam that the credit union's membership falls below the 50%+1 calculation, the credit union has 5 years to get the ratio back up without losing their designation.