<p>WASHINGTON – More than one-third of residents in areas NCUA designated as "underserved and low income" in 2001 are not, in fact, low income, according to ABA research. The ABA analyzed the areas designated by the NCUA as underserved in 2001 and said that 19.3% of their residents had median household incomes of greater then $50,000, reported Keith Leggett, ABA Senior Economist. An additional 15.5% of residents of those areas had median incomes of between $35,000 – $50,000, he said. "Most people would not consider a household income of $50,000 as `low income'," Leggett said. Leggett suggested the numbers undercut the idea that credit unions were necessarily going to be serving millions of more Americans simply because they added low income areas to their fields of membership. "These numbers really support some sort of CAP requirement," Leggett said, "since it's not clear credit unions will necessarily serve low income residents in these areas." He pointed out that financial education often rises with income and credit unions may find it easier to introduce upper income households to credit union membership. Leggett reiterated that the ABA applauds credit unions for reaching out to low income and underserved areas, but he pointed out that just adding those areas cannot be seen as necessarily providing services to low income households. "This makes me think of the phrase Reagan made popular during the cold war years," Leggett said. "Trust, but verify." David Berenbaum, Senior Vice President of the National Community Reinvestment Coalition echoed Leggett's thoughts. "Without seeing their analysis it would seem to me that these numbers only serve to highlight the importance of having some sort of oversight from the NCUA to make sure credit unions follow through. They give extra weight to the actions of the NCUA Board of Directors." Periodically over 2001, the NCUA has announced a running tally of the residents living in low income and underserved areas who have become eligible for credit union membership after credit unions added those areas to their fields of membership. According to the most recent announcement, January 2, credit unions "adopted" 16 million potential new members from "underserved and low income communities" in 2001. "Credit unions can play an important role in meeting the financial needs of these low-income and underserved communities, many of which will be otherwise driven to the predatory lenders which moved into these neighborhoods when the traditional financial institutions moved out," said NCUA Board Chairman Dennis Dollar in the January 2 announcement. "It will remain an NCUA priority to extend credit union services to these individuals, but to do so without unnecessary regulatory hurdles which actually could stifle this outreach," he said. Although the NCUA accepts a credit union's application to add a low-income area to its field of membership, the agency does not certify that the area is actually "low income." The agency relies on another department of government entirely for that designation. "When a credit union seeks to add a low-income area to its field of membership it must first identify the area as low-income," said Anthony LaCreta, NCUA's Director of Credit Union Development. It can do that by showing that the area meets one of seven criteria established by the Community Development Financial Institutions Fund, a bureau of the Treasury Department. According to statute, the criteria CDFI has set up cover questions like income, rates of employment, quality of housing, population loss and whether the area has "significant unmet needs for loans or other equity investments." The credit union then has to provide a business plan, LaCreta said, which indicates how it plans to serve the residents of the new field of membership. "So there is a good deal of work to get an application to that level," he said. The business plan must also include how the credit plans to use a branch it has in proximity to the low-income area, he said, or show how it plans to open a branch in the area to provide that service. Nicholas Owens, special assistant for public affairs to NCUA Board Chairman Dennis Dollar, responded to the ABA numbers by pointing out that the designation of an area as "low income" or "underserved" did not rely on every resident being low-income. "The point is that in these given areas which have been identified as not having adequate financial services or as low-income 16 million residents are going to have access to credit unions that they did not have it before, that is the bottom line." The designation is not determined based on every person in the area being low income, he said. Owens also agreed with the observation that credit unions were not the only financial institutions that use the CDFI designations to determine whether an area qualified as low income.</p>