CUNA Regulatory Comment Call

April 25, 2008

NCUA Proposed Rule on Changing the Low-Income Definition


Please feel free to fax your responses to CUNA at 202-638-7052; e-mail them to Senior Vice President and Deputy General Counsel Mary Dunn at and to Senior Assistant General Counsel Jeff Bloch at; or mail them to Mary and Jeff c/o CUNA's Regulatory Advocacy Department, 601 Pennsylvania Avenue, NW, South Building, Suite 600, Washington, DC 20004-2601. You may also contact us at 800-356-9655, ext. 6732, if you would like a copy of the proposal. You may also access it here.


The Federal Credit Union Act authorizes the NCUA Board to define "low-income members" so that FCUs with a membership predominantly consisting of low-income members may benefit from certain statutory relief, such as relief from requirements for secondary capital, member business loans, nonmember deposits, as well as to receive assistance from the Community Development Revolving Loan Fund (CDRLF). Until now, NCUA defines "low-income members" as members whose annual household income is at or below 80 percent of the national MHI, although a differential is provided for certain geographic areas with higher costs of living.

The MSAP recommended that the formula for determining whether an FCU qualifies as low-income be reassessed. The NCUA Outreach Task Force agreed with the MSAP that the standard for low-income designation be changed from MHI to MFI, consistent with the practice of other federal agencies.


For a metropolitan area, the proposal would define low-income members as those living in an area that is at or below 80% of the greater of either the standard for the whole metropolitan area or the national standard. Similarly, for those not within a metropolitan area, the proposal would include low-income members living in an area in which the standard is at or below 80% of the greater of either the statewide non-metropolitan area standard or the national non- metropolitan area standard. The income standard to be used will be the MFI standard or the median earnings for individuals, as reported by the U.S. Census Bureau.

This new definition will eliminate the need to adjust the income standards for areas with higher costs of living. The new definition will also better align the criteria for a low-income designation with the criteria for adding an underserved area to an FCU field of membership and will be similar to the requirements for certification as a community development financial institution (CDFI) under the Treasury Department rules, both of which use the MFI standard. Credit unions qualifying as a CDFI may obtain assistance from the CDFI fund to offer financial services and to further the economic development of low-income members.

In order to minimize the affect of the changes, the proposal includes a five-year grandfather clause for current low-income FCUs. Credit unions unable to meet the new definition will retain their low-income designation for at least five years.

The proposal will also outline the process for removing a low-income designation that may result for other reasons, such as changes to the field of membership, mergers, assumption of member shares from liquidating credit unions, or other similar reasons. Under this process, the regional director will provide written notice if the credit union no longer qualifies, and the credit union will then have five years to come into compliance with the rules that apply to credit unions that do not have the low-income designation, which includes requirements with regard to secondary capital, member business loans, nonmember deposits, and CDRLF financial assistance.

The credit union may also appeal the initial decision to revoke the low-income designation. The appeal must be submitted to the regional director within sixty days after the credit union receives the notice that it no longer qualifies for this designation.


  1. Do you agree with the proposed "low-income" definition?

  2. Do you believe the definition will result in more FCUs receiving the low-income definition? Do you believe there are current low-income FCUs that will lose this designation as a result of this proposal?

  3. If an FCU loses the low-income designation as a result of the change in the definition, do you believe five years will be enough time to come into compliance with these new requirements? If the FCU designation is removed for other reasons, do you believe five years is enough time to comply with additional regulatory requirements, such as requirements with regard to secondary capital, member business loans, nonmember deposits, and CDRLF financial assistance.

  4. Other comments?

Eric Richard • General Counsel • (202) 508-6742 •
Mary Mitchell Dunn • SVP & Associate General Counsel • (202) 508-6736 •
Jeffrey Bloch • Assistant General Counsel • (202) 508-6732 •
Lilly Thomas • Assistant General Counsel • (202) 508-6733 •
Catherine Orr • Senior Regulatory Counsel • (202) 508-6743 •