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Streamlined LICU eligible to help credit access NCUA
WASHINGTON (8/8/12)--As promised last month in Chicago at the American Association of Credit Union Leagues (AACUL) summer meeting, the National Credit Union Administration (NCUA) sent letters Tuesday to nearly 1,000 credit unions indicating they are eligible for low-income designation. That designation brings benefits that include the ability to accept supplemental capital and an exemption from the small business lending cap under certain circumstances.

The NCUA touted its initiative to streamline the process for federal credit unions to receive a low-income designation (LICU) as a way to bring more small businesses across America greater access to needed capital from federal credit unions. The greater access to credit, Matz said in the letter, should translate into job creation.

"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," Matz said.

Credit Union National Associaton (CUNA) President/CEO Bill Cheney said of the NCUA announcment, "The NCUA board clearly understands the pressing need for expanded authority in credit union member business lending to help spur the economy, and to give credit unions more flexibility to match their growth with supplemental capital. We appreciate the effort.

"The fact remains, however, there are thousands of credit unions that cannot win the LICU designation, for one reason or another. These credit unions can go no further in helping their members help their local economies--or to grow in order to match their members' needs--without changes in the law that limits credit union member business lending.

"We will continue to vigorously pursue those changes with Congress on behalf of our members."

The NCUA said its initiative was incorporated into a relief and recovery package for drought-stricken states announced at the White House yesterday. Of the LICU-eligible institutions, 470 federal credit unions--representing 47% of potential new LICUs, 52% of potential new assets, and 54% of potential new members--are headquartered in states identified by the National Oceanic and Atmospheric Administration as having "extreme" drought conditions.

The NCUA projected this initiative could unlock between $250 million and half a billion dollars in new, near-term business lending if all qualified federal credit unions participate. The initiative could double the number of LICUs and increase their member business lending by nearly 75%.

"Rather than waiting for credit unions to complete the required paperwork to become a LICU, NCUA today contacted 1,003 credit unions alerting them of LICU eligibility. Credit unions receiving letters may now opt-in with a simple reply that agrees to the LICU designation," Matz noted when announcing the agency's action.

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 cap on member business lending for credit unions, 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.
"Member business lending by credit unions sensibly diversifies portfolios and fills a market need," Matz said.

She added, "Credit unions often make the small business loans that other lenders avoid. A 2011 Small Business Administration-commissioned study also found that more than 80 cents of every dollar in credit union member business lending is an entirely new source of capital not available in the market today."

The average member business loan for all credit unions is $223,000, according to the regulator.


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