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Bankers misrepresent LICU letters CUNA warns iWSJi
WASHINGTON (8/14/12)--Some are mischaracterizing the National Credit Union Administration's (NCUA) recent move to streamline the process for federal credit unions to receive low-income designations, Credit Union National Association (CUNA) Deputy General Counsel Mary Dunn told The Wall Street Journal last week.

The NCUA last week sent letters to 1,003 credit unions to alert them of their low income credit union (LICU) designations. The LICU designation brings benefits that include the ability to accept supplemental capital and an exemption from the small business lending cap under certain circumstances.

Credit unions that wish to receive a LICU designation from the regulator may simply reply to the NCUA letter, rather than filling out more substantial paperwork.

The NCUA's LICU notifications were incorporated into a larger Obama administration plan to aid states affected by this summer's drought-like conditions. Around half of the LICU-eligible institutions that received the recent NCUA notices are headquartered in states identified by the National Oceanic and Atmospheric Administration as having "extreme" drought conditions.

CUNA and credit unions do not think this move to facilitate the process for LICU eligiblity should be made "into something nefarious and evil," Dunn added in the Journal coverage. Opponents have claimed that the LICU changes are an attempt to bypass the current 12.25% of assets credit union member business lending (MBL) cap. However, Dunn on Monday emphasized that the NCUA's LICU changes do not give credit unions new powers. "There are real hard and fast criteria that credit unions need to meet to establish themselves as LICUs," she said.

To qualify as a LICU, a majority of a federal credit union's membership must meet low-income thresholds based on 2010 Census data. In addition to the exemption from the statutory 12.25% statutory MBL cap, other advantages derived from the LICU designation include:

  • Eligibility for Community Development Revolving Loan Fund grants and low-interest loans,
  • Ability to accept deposits from non-members, and
  • Authorization to obtain supplemental capital.
The NCUA has estimated that LICU streamlining could result in $250 million to $500 million in new loans to small-business-owning credit union members. The initiative could double the number of LICUs and increase their member business lending by nearly 75%. However, it is not clear how many eligible credit unions will become LICUs, and the NCUA's LICU changes do not impact state credit unions.


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