By: Kevin Shaw, Senior Regional Director
Back in the 1850’s in Germany, the financial institution we know today as a credit union was referred to as “The People’s Bank.” Through the years, U.S. credit unions have been formed to assist people of modest means. It was this philosophy that created the credit union mission of “People Helping People.” One way for credit unions to benefit from their practices and philosophy of helping families of modest means is by obtaining a low income designation or LID. Below we outline some questions to consider if your credit union would like to pursue an LID designation:
Who can qualify for the low income designation?
All federally insured credit unions (federal or state chartered) that meet the eligibility criteria can receive the designation. Some state-chartered credit unions may not be afforded all of the designation’s benefits if their state’s laws do not allow them.
How do credit unions qualify for the designation?
A majority of the credit union’s membership (50.01 percent) must meet certain low-income thresholds, based on data from the Census Bureau and requirements outlined in NCUA’s Rules and Regulations Part 701.34.
What is the qualification process?
NCUA utilizes a software program in which a credit union’s AIRES file can be processed to determine the percentage of membership that falls within the low-income thresholds. NCUA will automatically process federally chartered credit union’s AIRES file at exam time to determine if they qualify. State chartered credit unions are required to request this process via their state or NCUA regulator, if federally insured.
TIPS: When preparing the credit union’s AIRES file, it is important to identify students within your membership as they are automatically classified as low income. Also, credit unions may remove any accounts with a PO Box address from the file because they will be automatically excluded from the low income category. Despite being excluded, accounts with a PO Box address would be counted against the total membership number, unfairly decreasing the credit union’s low income percentage.
What are the LID Benefits?
• An exception from the statutory cap on member business lending, which expands access to capital for small businesses and helps credit unions diversify portfolios;
• Eligibility for grants and low-interest loans from the Community Development Revolving Loan Fund used to stimulate economic development in low-income communities;
• Ability to accept non-member deposits from any source; and
• Authority to obtain supplemental capital.
For assistance in determining whether your credit union qualifies for a low-income designation, credit unions can go through their state examiner or contact NCUA directly at [email protected] or 703-518-6610.