The NCUA Low Income Designation (LID) is a powerful tool credit unions can use to expand services and compete in today’s environment. It opens the door to benefits such as exemption from the member business lending cap, access to non-member deposits (from any source), the ability to count subordinated debt towards net worth, and even potential flexibility in field of membership eligibility.
The NCUA’s process for determining eligibility can sometimes feel like a black box. The lack of transparency makes it difficult to know how far away a credit union is from qualifying or what specific steps might move the numbers in the right direction.
The good news is that credit unions have more control than they may realize when it comes to both attaining and retaining this designation.
Attaining LID
There are three main ways credit unions can attain LID:
1.Actual Members
If the majority of current members live in LID-qualifying geographies or belong to qualifying groups, the credit union can achieve the designation. The NCUA’s default method is to geocode member addresses from the AIRES share file to identify members in LID areas. In addition, high school students, college or vocational students, and active-duty military members automatically count toward LID.
2.Potential Members (for Federal Community-Chartered Credit Unions)
Federal community-chartered credit unions may qualify if a majority of the potential population within their field of membership meets the low-income definition. This path is an option when the service area has significant low-income populations, even if the current membership data falls short of the threshold.
3.Loan File Sampling
Credit unions can also use actual member income data from loan applications or statistically valid surveys. This requires a random sample that is representative of the membership and meets the NCUA’s standards for statistical confidence. This approach may work for credit unions that serve primarily low-income members who live in higher-income areas.
Retaining LID
Once a credit union has been granted LID, the designation remains in place even if the membership percentage dips below the threshold. If that happens, the NCUA issues a cure notice, and the credit union has five years to regain its qualifying majority, during which time the credit union still enjoys all regulatory benefits of LID. This cure period provides a safety net, but it also underscores the need for ongoing attention to data and membership trends so that the designation is not lost after the five-year window closes.
Options to Boost LID Percentage
Credit unions that want to protect their designation can take proactive steps to stay ahead of the NCUA’s assessments, and CUCollaborate provides tools and support to put them into practice. Key strategies include:
Monitor your Numbers and Review Data Quality
•Use tools like CUCollaborate’s LID dashboard to regularly check your LID percentage.
•Ensure that member records are clean, complete, and accurate.
•Have valid physical addresses for all members.
•Capture missing dates of birth.
•Verify and flag college students and active-duty military members.
Consider a Community FOM Expansion
Community-chartered credit unions, or those willing to pursue a community charter, may apply to expand into a geography that qualifies for LID. This can create a stronger foundation for long-term retention of the designation.
Member Acquisition
•Conduct outreach to prospective members living in LID-qualifying geographies.
•Target marketing and promotions to LID-qualifying geographies.
•Offer products and services designed to attract LID-qualifying groups.
•Establish forward-flow lending partnerships to bring in loans from LID-qualifying borrowers. CUCollaborate can support this effort through a network of partners that can help source LID-qualifying borrowers across various asset classes of loans.
Regular Uploads and Monitoring
One of the most effective ways to manage your LID status is through consistent monitoring. Numbers can shift for several reasons, such as the NCUA’s annual LID workbook updates, mergers/acquisitions, or changes in membership acquisition strategies. Watching for changes helps credit unions anticipate shifts in results and plan strategies in advance.
The Role of CUCollaborate
Successfully attaining or retaining LID often comes down to making the right moves at the right time and having the data to back it up. While credit unions can ask the NCUA to review their results, they are limited to only three submissions per year, and each request carries the risk of the NCUA determining the credit union no longer qualifies. CUCollaborate’s software makes it easy for credit unions to monitor their LID percentage without having to ask the NCUA to review their data, staying ahead of potential shifts and avoiding unwelcome surprises.
CUCollaborate helps credit unions strengthen their position by cleaning and enriching member records, identifying qualifying students and servicemembers, and mapping members and prospects against LID-eligible geographies. We also connect credit unions to various partners that help with strategic priorities, such as member growth or indirect lending from LID-qualifying geographies.
Beyond monitoring and enrichment, CUCollaborate guides institutions through the NCUA review process and supports compliant submission files. We help credit unions tailor their roadmaps to consider marketing, field of membership strategy, and targeted acquisition to increase low-income qualifying members. In short, CUCollaborate provides the tools and expertise to help credit unions take control of the process, making LID less of a regulatory mystery and more of a strategic advantage.
Low-Income Designation
