Document Sample
EDS Carl Banks
 A low-income (LI) CU is one that serves
  predominantly low-income members.
  “Predominantly” is defined as a simple
  majority (over 50% of your members).
 Section 701.34 of NCUA Rules and Regs.
  defines LI members as those members who
  earn 80% or less than the median family
  income for the metropolitan area where they
  live or national metropolitan area, whichever
  is greater.
 A regional director may use total median
  earnings for individuals instead of median
  family income if it is more beneficial to a
  federal credit union when determining if the
  credit union qualifies for a low-income credit
  union designation.
 The low-income designation must be given to
  a credit union by the NCUA Office of
  Consumer Protection.
 A regional director will use the statewide or
  national, non-metropolitan area median
  family income instead of the metropolitan
  area or national metropolitan area median
  family income for members living outside a
  metropolitan area. Member earnings will be
  estimated based on data reported by the U.S.
  Census Bureau for the geographic area where
  the member lives.
 The term “low-income members” also
  includes members who are enrolled as full
  or part-time students in a college,
  university, high school or vocational
 However, student CU’s cannot participate
  in the Community Development Revolving
  Loan Fund Program (CDRLP);
 Student CU’s are not considered low-
  income credit unions.
State law and state
  supervisory authority
  (SSA) govern the level
  of participation in the
If NCUA approves a
  state chartered CU as
  a low-income
  designated CU, SSA
  must concur for CU to
  be designated as low-
Can accept Non-Member
Participation in Comm.
 Development Revolving
 Loan Program
Can Accept Secondary
Special FOM Rules
Certain regulatory
 exemptions apply to
 LID credit unions
 LI credit unions can receive non-member
  shares or certificates from any source in
  addition to public unit accounts and accounts
  of other credit unions.
 Aggregate of such accounts cannot exceed
  20% of total shares or $1.5 million, whichever
  is greater, without a waiver from the NCUA
  Regional Director or SSA (for federally insured
  state-chartered CU’s).
 Before a LID CU accepts any public unit or
  nonmember shares in excess of 20% of total
  shares, the board of directors must adopt a
  specific written plan concerning the intended
  use of these shares and forward a copy of the
  plan to the Regional Director for review and
 The plan must include:
 (i) A statement of the credit union’s needs,
  sources and intended uses of public unit
  and nonmember shares;
 (ii) Provision for matching maturities of
  public unit and nonmember shares with
  corresponding assets, or justification for
  any mismatch; and
 (iii) Provision for adequate income spread
  between public unit and nonmember shares
  and corresponding assets.
 Governing rule is Part 705 of NCUA Rules
  and Regulations;
 LI credit unions are eligible to participate in
  the CDRLP;
 The CDRLP may approve loans/deposits to a
  low-income CU in an aggregate maximum
  of $300,000; Rate this year is only 0.40%.
 In addition, LI credit unions are also
  eligible for Technical Assistance (TA)
  grants to improve member services and
  increase the efficiency of credit union
 Funds for TA grants are provided by
  Congressional appropriation, and also
  from interest NCUA earns on CDRLP
 TA grants for 2012 are available to LID
  CUs in an aggregate amount of $25,000.
Relatively simple
Online application
 for 2012 funding
Must apply through
 NCUA’s Office of
 Small Credit Union
 Initiatives (OSCUI).
Key Rule:
The FCU Act,
 Section 1790d(o)
 permits only low-
 income credit
 unions to include
 secondary capital
 accounts in their
 computation of
 net worth.
Section 701.34(b)
 of NCUA Rules
 and Regulations
 discusses the
 requirements for
 secondary capital.
 To enable those credit unions designated as
  low-income to support greater lending and
  improve other financial services for the
  limited income groups and committees they
 Secondary capital is an uninsured obligation
  that is offered only to organizational
 It must take the form of subordinated debt
  (like a borrowing transaction that must be
  repaid over time);
 Subordinated” means the secondary
  account holder’s claim must come AFTER
  any other claims from shareholders,
  creditors or the NCUSIF.
 Therefore, it is considered a somewhat
  risky investment for an organization to
 Usually provided to well-managed financial
Secondary capital is
 uninsured and
 cannot be shown as
 a share account—It
 is subordinated
Funds must be
 available to cover
 losses after
 reserves and UE,
 but prior to
The accounts must
 have a minimum
 maturity of 5 years;
The accounts may not
 be used as security
 on other obligations
 of the account
 holder; &
The accounts will not
 “carry over” as
 secondary capital in
 the event of merger
 into a CU that is not
 LI- designated.
 NCUA has adopted special rules that pertain
  to low-income credit union charters as well
  as FOM additions;
 These special rules provide additional latitude
  to enable underserved, low income
  individuals to gain access to CU service.
 Any multiple common bond credit union can
  add low-income associations to their fields of
 A LI-designated community FCU has
  additional latitude in that it may also serve
  persons who perform volunteer services,
  participate in programs to alleviate poverty or
  distress, or who participate in associa- tions
  headquartered in the community.
Must submit written
 request to NCUA
 Office of Consumer
Request must contain
 supporting that
 majority of
 members or
 potential members
 meet the LIT
 designation req.
 Zip Code: This is the most common & easiest
  method to determine eligibility;
 Zip codes of 100% of the credit union’s members
  of record as of a particular date will be complied
  and aggregate # of members residing in each ZIP
  will be determined. Either median family income,
  total median earnings or statewide or national
  non-metropolitan area median family income will
  be analyzed to determine eligibility.
 NCUA and EDSs will utilize automated Low-
  Income Designation Assessment Tool to
  determine if a CU qualifies for the LID.
 More than 50% of the credit union’s current
  members must reside in defined low-income
  ZIP codes, based on Median Family Income
  Statistics or other data as previously explained.
 This method can be used to establish that
  members and potential members meet the
  low-income test.
 If CU does not qualify using Zip Code analysis,
  a CU can use other methods to try to qualify
  for the LID.
 Credit unions may provide actual member
  income from loan applications or surveys to
  demonstrate a majority of their membership is
  low-income members.
 Loan Survey: Review 100% of outstanding
  loans (can also include paid-off and charged-
  off loans if within last two years) and submit
  income data to NCUA. More than 50% of the
  borrowers must meet the Low-Income Test
 You can try loan method if the Zip code
  method does not work.
 Membership Survey: Survey must include
  100% of credit union’s members as of a
  particular date (or conduct a statistically valid
  survey acceptable to NCUA).
 A simple majority of the members must
  respond and qualify under the LIT.
 This method is rarely used for LID
 U.S. Census Bureau Block Group
  Information: This method could be used to
  determine a community credit union’s
  eligibility for LI designation or non-
  designated LICU’s FOM expansion request
  into a low-income community. This method
  will determine a defined community’s median
  family income.
 Information for this method can be obtained
  from the U.S. Census Bureau’s website;
 WWW.Census.Gov , or
 Researching information at your local library.
 Other Supportive Statistical Data:
 Other statistical data provided by reputable
  organizations may be used if the NCUA is
  satisfied that the data presented is customary
  and uniformly accepted demographic
  information. If more than 50% of the
  members meet the LIT, then the CU or the
  FOM expansion group qualifies as LI.
Applying for LI
  designation is not
  that difficult;
Please make
  with the EDS for
  assistance in
That’s All Folks !!



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