Aug. 8, 2012 – NCUA yesterday said it has informed 1,003 credit unions they are eligible for the agency’s low-income designation, which makes them eligible to engage in unlimited member business lending and receive other benefits.
The initiative was incorporated into a relief and recovery package for drought-stricken states announced at the White House Tuesday. Of the LICU-eligible institutions, 470 federal credit unions – representing 47 percent of potential new LICUs, 52 percent of potential new assets, and 54 percent of potential new members – are headquartered in states identified by the National Oceanic and Atmospheric Administration as having “extreme” drought conditions.
“With this initiative, we are cutting regulatory red tape and expanding access to capital for small businesses, which should translate into job creation,” said NCUA Board Chairman Debbie Matz. “Providing small businesses with the money needed to open their doors, create jobs, or expand operations will help our economy. This action is particularly timely for the 27 states devastated by this summer’s historic drought.”
The credit unions contacted by the agency only have to send a reply that agrees to the designation, the agency said. NCUA has published a frequently asked questions document explaining the designation.
NCUA says the move could unlock between $250 million and $500 million in new, near-term business lending if all qualified federal credit unions participate. It could double the number of LICUs and increase their member business lending by nearly 75 percent.
To get NCUA’s low-income designation, a majority of a federal credit union’s membership must meet low-income thresholds based on 2010 census data. Besides unlimited member business lending, these credit unions:
- are eligible for Community Development Revolving Loan Fund grants and low-interest loans;
- are authorized to accept deposits from non-members; and
- are authorized to obtain supplemental capital.
“Member business lending by credit unions sensibly diversifies portfolios and fills a market need,” concluded Matz. She said the average member business loan for all credit unions is $223,000.
[Note: Matz has also asked Congress to raise the MBL cap from 12.25 percent to 27.5 percent, and Treasury has said the approach reflected in current legislation to make that happen (H.R. 1418 and S. 2231) is a reasonable one. NAFCU is encouraging credit unions to keep up their efforts to build lawmakers' support for the MBL cap lift during this month's district work period; to get started, go to our grassroots action center.]