Credit unions provide valuable access to financial services for people underserved and unserved by traditional financial institutions. In 1970, the Federal Credit Union Act was amended to authorize the NCUA Board to define "low-income members" to permit credit unions predominantly serving them to take advantage of certain statutory benefits. The low-income designation criteria were amended in 2008 to use median family income or median earnings for individuals to determine if a credit union qualifies for a low-income designation and potential assistance through loans and grants from NCUA’s Community Development Revolving Loan Fund (CDRLF).
With the low-income designation, credit unions gain access to additional sources of funding and resources, from both NCUA and outside parties. Some additional sources of funding include:
- Accepting non-member deposits
- Offering secondary capital accounts
- Qualifying for exceptions from the aggregate loan limit for member business loans
- Participating in the Community Development Revolving Loan Program
The Community Development Revolving Loan Program provides both loans and grants for technical assistance to low-income credit unions. Only operating credit unions are eligible to participate in the program.
What is a Low-Income Credit Union?
A low-income credit union is one in which a majority of its membership (50.01%) qualifies as low-income members as defined in Section 701.34 of the NCUA Rules and Regulations. Low-income members are those members who earn 80% or less than the median family income for the metropolitan area where they live, or the national metropolitan area, whichever is greater.
Your local NCUA examiner or the Office of Consumer Protection can assist your credit union in determining if you may qualify for a low-income credit union designation. More information is available in the Office of Small Credit Union initiatives section of the NCUA website.
Community Development Credit Unions (CDCUs)
NCUA does not designate or charter CDCUs. The term "CDCU" is not a term used in the Federal Credit Union Act or NCUA’s regulations. Credit unions using the term CDCU generally define themselves as credit unions dedicated to serving and revitalizing low-income communities. NCUA understands CDCUs predominately serve people of modest means and are committed to serving their members as well as the economic and development needs of the broader community. Self-designated CDCUs may be federally or state-chartered and can have a community, associational, occupational, or multiple common bond field of membership.
Characteristics of LICUs, CDCUs and the Members They Serve
LICUs and, generally, CDCUs typically serve a membership primarily composed of low-income members. These credit unions face unique challenges serving members. The challenges are even more prevalent in small credit unions. Their members may face one or more of the following circumstances and characteristics:
- Unsteady employment (often temporary jobs with long hours);
- Part-time employment with multiple jobs or side businesses;
- Unstable residency (often rent or live in public or subsidized housing);
- No health insurance;
- Lack of affordable child care;
- Receive supplemental security income or social security disability benefits;
- English as a second language;
- Low share account balances;
- Need for small dollar loans;
- Limited financial resources;
- Limited, negative, or no credit history; and,
- A need for labor-intensive services (e.g. money orders, financial education and/or counseling, check cashing).