August 9, 2012
Eighteen credit unions in Oregon and Washington were notified Tuesday by the National Credit Union Administration (NCUA) that they are eligible to become Low-Income Credit Unions (LICUs), based on 2010 Census data.
Credit unions receiving letters may now opt-in with a simple reply that agrees to the LICU designation rather than fill out extensive paperwork.
One of the important benefits of the designation is the ability of LICUs to make unlimited member business loans (MBLs). The NCUA projects 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 percent.
According to a source at the NCUA, regional directors will be watching very closely and will want to see clearly that any increased MBL lending is well-managed and being done in a safe and sound manner. Newly designated LICU’s should be mindful of concentration risks and continue to diversify their portfolio.
The NCUA also indicated that it would be prudent for any credit union looking to exceed the MBL cap upon becoming a LICU to have pre-decisional conversations with their NCUA examiner about their direction. However, regardless of precautions, it does give existing MBL programs near the cap room to grow.
In addition to the exemption from the statutory 12.25-percent MBL cap for credit unions, other advantages derived from the LICU designation include:
- Ability to accept deposits from non-members;
- Authorization to obtain supplemental capital;
- Access to the NCUA’s Office of Small Credit Union Initiatives programs, including the Community Development Revolving Loan Program (CDRLP) and Technical Assistance grants, along with consulting services offered by the economic development specialists; and
- The opportunity to receive assistance from other sources, such as the U.S. Treasury’s Community Development Financial Institution (CDFI) program, private benefactors and foundations, and institutions interested in receiving Community Reinvestment Act credit.
“I am excited about the additional benefits credit unions will be able to offer their members as part of the LICU designation,” said John Trull, director of regulatory advocacy for the Northwest Credit Union Association (NWCUA). “And the new process of simply opting in makes it that much easier for qualified credit unions to have easy access to these valuable opportunities.”
Qualified credit unions in the Northwest include:
- Amicus Federal Credit Union
- CALCOE Federal Credit Union
- Cheney Federal Credit Union
- CWU Federal Credit Union
- EWEB Employees Federal Credit Union
- IBEW/SJ Cascade Federal Credit Union
- Laneco Federal Credit Union
- McKenzie Valley Federal Credit Union
- Monad Federal Credit Union
- Northwest Baptist Federal Credit Union
- OPC Federal Credit Union
- Oregon Employees Federal Credit Union
- OSU Federal Credit Union
- Rivergate Federal Credit Union
- Sears Spokane Employees’ Federal Credit Union
- Teamsters Council 37 Federal Credit Union
- Wenatchee Valley Federal Credit Union
The NWCUA Regulatory Advocacy team works with state and federal regulators to help reduce the regulatory burden on credit unions and protect the credit union movement. The Association encourages members to participate in the regulatory process. If you have any questions on this or any regulatory issue, please contact Director of Regulatory Advocacy John Trull at email@example.com, or at 503.350.2209.