Becoming a credit union that has a low income designation provides a variety of benefits such as secondary capital, loan/grant opportunities and special field of membership rules. CUCollaborate can help you successfully navigate this process as well as demonstrate how this will impact your field of membership. If you are interested in learning more about becoming a low income designated credit union, please fill out the form on the right.
Call us today to learn more about how a low income designation can benefit your credit union at (202) 831-2500
Low-income designated credit unions (LICUs) can obtain shares from any nonmember, enabling them to build assets with funds from sources outside their limited field of membership. These nonmember shares are insured the same as member shares, and limits have been raised to either $3 million or 50% of total shares, whichever is greater. These opportunities are not available to most credit unions, which can only receive insured shares from members, government entities, or other credit unions.
Low-income designated federal credit unions can take on subordinated, uninsured debt in the form of secondary capital accounts. This secondary capital counts towards statutory requirements, and can be used to support growth.
In order to receive secondary capital, credit unions must submit a plan to NCUA detailing:
Most federally insured credit unions face a cap on how much they can lend to member businesses. This cap is equal to either 1.75 actual net worth or 12.25% of total assets, whichever is lower. Low income credit unions are exempted from this restriction, granting them unrestricted ability to offer commercial loans, as long as they comply with all other aspects of NCUA's member business loan rule.
Low-income designated federal credit unions (LI FCU) with a multiple common bond charter can add associations to their field of membership that have the sole purpose of making people eligible to become members. The only restriction is that these new members must all meet the definition of low-income. For LI FCUs with a community charter, it is possible to expand field of membership to include any participants in programs headquartered in the community or intended to alleviate poverty or distress
The Community Development Financial Institution Fund offers grants to financial institutions that serve low-income communities. In 2017, 56 credit unions with a CDFI certification received $39.5 million in awards from this fund. The CDFI certification is different from a low-income designation, but low-income designated credit unions get NCUA assistance in applying for certification, as well as a simpler application process.
In order to qualify for a low-income designation, more than 50% of a credit union's members must be low-income. A low-income member is defined as: