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September 24, 2012 September 24, 2012 September 24, 2012
LOW INCOME DESIGNATION (LID)
What’s All the Fuss?
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§ 701.34 Designation of low-income status
Based on data obtained through examinations,
NCUA will notify a federal credit union that it
qualifies for designation as a low-income credit
union if a majority of its membership qualifies as
low-income members. A federal credit union
that wishes to receive the designation will notify
NCUA in writing within 30 days of receipt of
NCUA’s notification.
WHAT IS A LOW INCOME DESINGATION (LID)?
LID is a series of legislated benefits that
accrue to CUs that meet certain membership
criteria.
• A FCU qualifies for LID when a majority of
its membership (50% + one member)
qualifies as Low-Income Members.
• For FISCUs, the designation and analysis
is done by SSAs in compliance with State
then Federal regulations.
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How many LID credit unions are there?
o Last month. 1,064 LICUs with $43B in assets.
• 10% have assets in excess of $100M
• 4 have assets in excess of $1B.
o Today. 1,003 newly identified Federal LICUs,
with $103B in assets.
• 16 % have assets in excess of $100M
• 19 have assets in excess of $1B.
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LID Analysis tool
• Zip Code Analysis.
– “Geocodes” the member addresses
– Computes census income data for those
addresses
– Determines how many members have income
of 80% or less than the corresponding
geography’s median family income.
– If more than 50% of your total members qualify
as low-income, the credit union qualifies for the
designation.
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WHAT IS A LOW INCOME MEMBER?
Metropolitan Areas - Members with income that
falls at or below 80% of the median family income
(MFI)* for the metropolitan area where they live or
the national metropolitan area, whichever is greater.
Non-Metropolitan Areas - Members with income
that falls at or below 80% of either the statewide,
non-metropolitan area or national, non-metropolitan
area MFI*, whichever is greater.
* Median Earnings for Individuals (MEI) may be substituted if it is more
beneficial than MFI
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BENEFITS OF LID
1. Non Member Deposits
2. Member Business Loans (MBL)
3. Secondary Capital Accounts
4. Office of Small CU Initiatives
1. Loans
2. Grants
3. Consulting Services
5. Transactional services to potential
members
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Additional Regulation and Reporting for LICUs
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Benefit #1 – Non Member Deposits
Accept
deposits from – Any source
Accept deposits
ONLY from
– any CU
– Public units /
political
subdivisions
NON LID CU LID CU
UP to greater of
20% of shares or $3Million 9
Benefit #2 – Member Business Loans
Exempt from
limitation.
Subject to
12.25%
limitation.
NON LID CU LID CU
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Benefit #3 – Secondary Capital Accounts
Must Have a
Written Secondary
Capital Plan
Approved by the
Regional Director
Prior to Accepting
Secondary Capital
Accounts
Not Available
NON LID CU LID CU
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Benefit #4 – CDRLF Loans
CDRLF Loans, up to
$500,000 for five
years currently
0.40%
Not
Available
NON LID CU LID CU
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Benefit #5 – CDRLF Grants from NCUA
Eligible to apply for
CDRLF Grant funding
as available.
Not
Available
NON LID CU LID CU
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Benefit #6 – EDS Consulting
No limitation
on asset
size.
Eligibility Criteria:
• Less than $10
million in assets
• Proposed CU group
• Newly chartered
less than 10 years
old
NON LID CU LID CU
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Benefit #7 – Transactional Services for FCUs
Provide the following services to potential members:
Selling negotiable checks including travelers checks, money orders, and other similar money transfer instruments (including international and domestic electronic fund transfers and remittance transfers, and
Cashing checks and money orders for a fee.
NON LID CU LID CU
Not
Available
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Other Grant Programs
• Many low-income credit unions also obtain
assistance from the Treasury by qualifying as
Community Development Financial Institutions.
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If you did not receive an opt-in letter
CU might still qualify based on a more detailed
analysis of membership.
NOT included in AIRES
•PO Boxes are not counted by the automated
analysis tool.
•Low Income automatically includes members
enrolled as students, in a college, university, high
school, or vocational school.
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Other Methods for Qualifying
1) 100% Loan Review – include enough member loans that the outcome reflects more than 50 percent of qualifying members.
2) 100% Membership Survey – suggest using income ranges in survey.
3) Combination of 100% Loan Review and 100% Membership Survey - so long as a member is ONLY included once.
4) Statistically Valid Sample – use when membership is large and 100% loan and/or membership survey is cost prohibitive. Sample cannot combine a loan file review with a survey.
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FISCUs and LID
• The state regulator makes the low income
designation
• With the concurrence of the appropriate NCUA
regional director.
• On the same basis used for FCUs.
• The LID analysis tool is available on NCUA
Central to state examiners who have NCUA
computers (most states).
• OCP will coordinate each state-chartered credit
union LID analysis request with the SSAs and
regions.
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Going forward
• OCP will update LID analysis on a quarterly basis
and notify newly eligible federal credit unions of
the opportunity they have for low-income
designation.
• FCUs may request the exact results of the
analysis from OCP.
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Things Change
• NCUA will notify a credit union in writing if it no
longer meets the LICU criteria.
• NCUA realizes the value of holding LID; therefore,
each credit union has five years from the date of
notification to
– Re-qualify as a LICU or
– Come into compliance with regulations applicable
to credit unions that do not have a LID.
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Re-Qualify
• Analyze income data more comprehensively
• Increase LI membership through products and
marketing.
• If a multiple common bond FCU, add an
underserved area.
• If a community charter, market and add new
members from underserved areas within the
community boundaries.
• Convert to a community charter serving a
geographic area qualifying for an LID.
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Office of Small Credit
Union Initiatives
Phone: (703)-518-6610 [email protected]
Office of Consumer Protection
1775 Duke Street
Suite 4206
Alexandria, VA 23060
Phone (703)518-1140
NCUA LID Contacts
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