Low-Income Designated Credit Unions
Many credit unions provide valuable access to financial services for people of all income levels, including those underserved or unserved by traditional financial institutions. Credit unions serving predominately persons qualifying as “low-income members” are awarded NCUA’s “low-income designation” and are afforded certain benefits provided for by law, including:
- accepting non-member deposits from any source
- offering secondary capital accounts
- qualifying for exceptions from the aggregate loan limit for member business loans
- participating in NCUA’s Community Development Revolving Loan Program providing both loans and grants for technical assistance. For more information, visit NCUA’s Office of Credit Union Resources and Expansion (opens new window) page.
What is a Low-Income Credit Union (LICU)?
A LICU is a credit union in which a majority of its membership (50.01%) qualifies as low-income members as defined in Section 701.34 of NCUA Rules and Regulations (opens new window) (You will be leaving NCUA.gov and accessing a non-NCUA website. We encourage you to read the NCUA's exit link policies. (opens new page).) . Low-income members are those who earn 80 percent or less than the median family income or total median earnings for individuals for the metropolitan area where they live, or the national metropolitan area, whichever is greater. For non-metropolitan areas, the figures for the state-wide non-metropolitan area or the national non-metropolitan area are used, whichever is greater.
If you would like to locate LICUs in your area or determine if a credit union may qualify for NCUA’s low-income designation, contact NCUA’s Office of Consumer Financial Protection.
What are Community Development Credit Unions (CDCUs)?
The term "CDCU" is not a term used in the Federal Credit Union Act or NCUA’s regulations. Credit unions using this term generally define themselves as a credit union dedicated to serving and revitalizing low-income communities.
Characteristics of LICUs, CDCUs and the Members They Serve
LICUs, and generally CDCUs, serve a membership primarily composed of low-income members. These credit unions face unique challenges, as their members typically have limited financial resources, and have more of a need for one of the following:
- Access to share accounts with low minimum balance requirements
- Access to small dollar loans
- Access to smaller dollar business loans Access to credit building loan products or loans based on having limited, negative, or no credit history; and
- Access to more labor-intensive services, such as money orders, more frequent withdrawals, financial education and/or counseling, check cashing, etc.
I am a financial services expert with a deep understanding of credit unions, particularly those designated as low-income credit unions (LICUs) and community development credit unions (CDCUs). My expertise stems from extensive research, industry knowledge, and practical experience in the realm of financial inclusion and credit union operations.
Now, let's delve into the concepts presented in the article about Low-Income Designated Credit Unions:
Low-Income Designation Benefits:
Many credit unions play a crucial role in providing financial services to individuals across income levels. However, those primarily serving "low-income members" can receive a "low-income designation" from the National Credit Union Administration (NCUA). Here are some benefits and provisions associated with this designation:
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Accepting Non-Member Deposits:
- LICUs are allowed to accept deposits from sources that are not members of the credit union.
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Secondary Capital Accounts:
- LICUs have the ability to offer secondary capital accounts, enhancing their financial flexibility.
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Exceptions from Aggregate Loan Limit:
- They qualify for exceptions from the aggregate loan limit for member business loans, providing more lending capacity.
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Participation in Community Development Programs:
- LICUs can participate in NCUA’s Community Development Revolving Loan Program, offering both loans and grants for technical assistance.
What is a Low-Income Credit Union (LICU)?
A LICU is defined as a credit union where a majority (50.01%) of its membership qualifies as low-income members. The criteria for low-income members are based on earning 80 percent or less than the median family income or total median earnings for individuals in the relevant metropolitan or non-metropolitan area.
Community Development Credit Unions (CDCUs):
The term "CDCU" is not explicitly defined in the Federal Credit Union Act or NCUA’s regulations. However, credit unions using this term generally position themselves as institutions dedicated to serving and revitalizing low-income communities.
Characteristics of LICUs, CDCUs, and Their Members:
LICUs and CDCUs typically serve a membership primarily composed of low-income individuals. The unique challenges they face include catering to members with limited financial resources. Some key characteristics include:
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Access to Share Accounts with Low Minimum Balance Requirements:
- Providing accessibility to accounts with minimal balance requirements.
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Access to Small Dollar Loans:
- Offering small dollar loans to meet the financial needs of members.
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Access to Smaller Dollar Business Loans:
- Facilitating access to business loans for smaller amounts.
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Credit Building Loan Products:
- Providing loan products to build credit for individuals with limited or no credit history.
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Labor-Intensive Services:
- Offering services such as money orders, frequent withdrawals, financial education, counseling, and check cashing to address the specific needs of their members.
For those interested in locating LICUs in their area or determining if a credit union qualifies for NCUA’s low-income designation, contacting NCUA’s Office of Consumer Financial Protection is recommended.
This comprehensive approach helps credit unions designated as low-income to better serve their communities and fulfill the diverse financial needs of their members.
