CUNA Comment Letter

CUNA Letter on NCUA Proposal Regarding Student Credit Unions

May 21, 2004

Ms. Becky Baker
Secretary of the Board
National Credit Union Administration
1775 Duke Street
Alexandria, Virginia 22314-3428

Dear Ms. Baker:

The Credit Union National Association (CUNA) appreciates the opportunity to provide comments on the proposed rule that amends the Community Development Revolving Loan Program (CDRLP) under 12 CFR Sec. 705 to make student credit unions eligible to apply for low interest loans and technical assistance within the CDRLP. CUNA is the only national trade association representing more than 90 percent of our nation’s 9,600 state and federal credit unions.

Summary of CUNA’s Views

CUNA supports the proposal that would allow student credit unions to participate in and receive loans through the Community Development Revolving Loan Program for Credit Unions (CDRLP).

At the same time, CUNA urges the NCUA Board to consider ways in which eligible community development credit unions could receive additional support through the agency’s programs, such as the CDRLP.

Discussion of CUNA’s Comments

Under NCUA’s rule implementing the CDRLP, participating credit unions are defined as institutions that are specifically involved in stimulating economic development and community revitalization in the areas they serve. Their membership must consist of predominantly low-income members, consistent with NCUA’s rules or other applicable standards, and they must have been selected for inclusion in the program based on their application.

The purpose of the CDRLP is to support community development, which is accomplished by providing low-rate loans as well as technical assistance to eligible credit unions.

Until now, NCUA has taken the position that student credit unions are not eligible to apply for the CDRLP, even though they are designated as “low-income” for purposes of receiving nonmember deposits. NCUA took that position because of its perception that such credit unions did not help stimulate their local communities or help revitalize them.

NCUA now suggests that this rationale was questionable and is proposing that student credit unions be considered for the CDRLP. NCUA’s position is that student credit unions do meet the program’s criteria, including the requirement that they have a significant impact on their communities. In the case of student credit unions, this is accomplished through financial services as well as financial education.

CUNA agrees with NCUA’s revised position concerning the economic contributions of student credit unions and supports the agency’s proposed rule that would allow them to seek assistance through the CDRLP.

Not only do we think they should be entitled to apply for participation, but we also think that, to the extent student credit unions receive support through the CDRLP, they will benefit and in turn, so will their communities.

It is important to note that as of today, there are but seven student credit unions and not all of them would necessarily apply for resources through the CDRLP. In fact, over the years, there has been a sharp decline in the number of student credit unions from 120 just a few years ago to the current number.

It is also significant that the proposal would make student credit unions eligible to apply for the program, but would not guarantee funding or assistance for any credit union.

While CUNA supports helping student credit unions in the manner NCUA has proposed, we also ardently support, as we have in the past, community development credit unions. As part of the approval process for the proposal, CUNA respectfully requests that the agency consider ways to ensure fair and sufficient support for community development credit unions, as well as ways to expand funding in the future for this important segment of the credit union system. CUNA would welcome the opportunity to be part of a dialogue with the agency, along with the National Federation of Community Development Credit Unions, as to how this could best be accomplished.

Conclusion

CUNA supports the proposal to make student credit unions eligible to apply for low interest loans and technical assistance within the CDRLP as another mechanism through which credit unions can help their communities. If you have any questions about our comments or would like to follow up on our recommendations regarding community development credit unions, please contact me or CUNA Assistant General Counsel Michelle Profit at (202) 638-5777. Thank you for consideration of our views.

Sincerely,

Mary Mitchell Dunn
Associate General Counsel
And Senior Vice President

Cc: NCUA Board Chairman JoAnn Johnson
NCUA Board Member Debbie Matz
Mr. Anthony LaCreta, Office of Community Development, NCUA
Mr. Cliff Rosenthal, President, NFCDCU
Ms. Gillian Coulter, Executive Director, CCUC