More than 1,000 credit unions were told by the NCUA on Tuesday that they can use a simple opt-in reply to become a Low-Income Designated Credit Union.

That designation exempts the credit union from the 12.25% cap on member business loans and should free from $250 million to $500 million in business lending if all 1,003 credit unions sent the letter from the NCUA on Tuesday decide to participate, the agency said.

That could double the number of existing LICU credit unions, the agency said.

The LICU streamlining process – which allows credit unions to opt-in to become a LICU with a simple reply rather than go through the traditionally required paperwork – was part of a drought relief and recovery package announced by President Obama at the White House on Tuesday.

The NCUA said of the LICU-eligible institutions, there are 470 federal credit unions – representing 47% of potential new LICUs, 52% of potential new assets and 54% of potential new members – headquartered in states that the federal government has identified as being in “extreme” drought conditions.

“With this initiative, we are cutting regulatory red tape and expanding access to capital for small businesses, which should translate into job creation,” said NCUA Board Chairman Debbie Matz.

“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.

Besides member business lending cap being waived, other benefits of LICU designation are 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 agency said.

To qualify as a Low-Income Designated Credit Union, a federal credit union's membership must meet low-income thresholds based on 2010 Census data.

“Member business lending by credit unions sensibly diversifies portfolios and fills a market need,” Matz said. “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 credit union and banking industries are currently waging a lobbying war in Congress over proposed legislation that would raise the MBL cap.

The average member business loan for all credit unions is $223,000. More information from the NCUA about the new LICU effort is online.

Instant Insights /

NCUA Launches Low-Income Credit Union Blitz in MBL Boost

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