Consulting
Low-Income Designation
Earning a Low-Income Designation from the NCUA provides a variety of benefits, such as secondary capital, loan and grant opportunities, and special field of membership rules.
Need Help Qualifying?
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 earning a low-income credit union designation, please fill out the form on the right.
Call us today at (202) 831-2500 or fill out the form to learn more about how a low-income designation can benefit your credit union.
Client Feedback
“We really appreciate CUCollaborate helping us to retain our Low-Income Designation. Following our call with the company, everyone started clapping. I’ve never seen that happen in any meeting I’ve attended at the CU (17 years worth) so that’s how impressive and hopeful you made everyone in the room. 😊 This is a very big deal for us and feel very fortunate that we found you when we did.”
Crystal Tucker
Member Experience Manager, Wasatch Peaks Credit Union
Nonmember Deposits
Receive Insured Shares from Outside Your Membership
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 can only make up $3 million or 50% of total shares, whichever is greater. These opportunities are not available to most credit unions, but they are open to any that have earned a low-income credit union designation. Most credit unions can only receive insured shares from members, government entities, or other credit unions.
Secondary Capital
Increase Net Worth with Secondary Capital
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:
- How the capital will be used in a way that supports the credit union's business plan
- How the credit union plans to repay the capital
- How much secondary capital the credit union plans to accept
Member Business Lending Cap Exemption
Offer more Loans to Member Businesses
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 times actual net worth or 12.25 percent of total assets, whichever is lower. Organizations that earned the low-income credit union designation 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 rules.
Loan & Grant Opportunities
Access the Community Development Revolving Loan Fund
Federal credit unions, and most federally insured state credit unions, with a low-income designation are eligible to apply for loans and grants from the Community Development Revolving Loan Fund (CDRLF). CDRLF is a program administered by NCUA for the purpose of assisting LICUs in meeting the financial service needs of their members. The amount available through CDRLF varies based on congressional approval, but in 2019, $3.9 million in loans and $2 million in grants are expected to be offered through this program.
Special Field of Membership Rules
Reach a Wider Field of Membership
A 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.
How to Qualify
Determining if you Qualify for a Low-Income Designation is Easy
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:
- one whose median family income is 80% or less than the median family income for the metropolitan area in which they live or the national metropolitan area, whichever is greater, or
- an individual who earns 80% or less than the median earnings for individuals for the metropolitan area where they live or the national metropolitan area, whichever is greater.
The NCUA determines whether a credit union qualifies by making assumptions about members' income based on where they live. By being strategic in obtaining a low-income designation, credit unions can unlock valuable benefits without having to change their business.
