CUNA Regulatory Comment Call

August 12, 2010

Interim Final Rule: Low-Income Definition


Please send comments on the interim final rule. to Senior Vice President and Deputy General Counsel Mary Dunn and Regulatory Counsel Luke Martone, or contact us at (800) 356-9655 ext. 6743 with any questions.


The Federal Credit Union Act authorizes NCUA to establish regulations to provide credit unions consisting of predominantly low-income members with certain statutory relief and access to the Community Development Revolving Loan Fund. This authority has been implemented in § 701.34 of NCUA’s regulations and is referred to as the low- income rule.

In 2008 NCUA made several changes to its low-income rule, these included: replacing median household income with median family income or median earnings for individuals; and eliminating the application requirement for prospective low-income credit unions (LICUs). Rather than requiring credit unions to apply for LICU designation on an individual basis, NCUA’s geo-coding software will automatically calculate a credit union’s data for LICU status during the credit union’s examinations and is currently being implemented.

Specifically, the automated process will involve linking member address information to publicly available information from the Census Bureau to estimate member earnings. The geo-coding software will use member street addresses collected during a credit union’s examinations to determine the geographic area and metropolitan area for each member account. NCUA will then use income information for the geographic area from the Census Bureau to estimate each member’s earnings.

In addition, the 2008 rule established, as an alternative to relying on NCUA’s geo-coding software, the option for a credit union to provide actual member income information as a basis for qualifying as a LICU. However, as worded in the 2008 rule, the alternative approach has led to confusion among prospective LICUs. Specifically, according to the 2008 rule, as an alternative a credit union could apply for low-income designation by relying on a comparison of actual income for individual members to statistical data on median family income.

Brief Description of the Interim Final Rule

The IFR amends NCUA’s low-income rule to clarify that—as an alternative to relying on NCUA’s geo-coding software—a credit union may assess whether its members qualify as low income by using median family income and median earnings for individuals.

The new “low-income member” definition includes members:

The IFR provides that only like categories of data may be compared in making the determination that a credit union’s membership meets the low-income definition. Actual individual member income information should not be measured against median family income, but instead, should be measured against individual median earnings.

As of the IFR’s effective date, NCUA will no longer consider requests for a low-income designation based on a comparison of actual individual member income data to median family income data. The IFR is effective as of August 5, 2010. However, NCUA will accept comments on the IFR through October 4, 2010.

Questions to Consider Regarding the Interim Final Rule

  1. NCUA adopted the IFR in an effort to clarify confusion regarding the language in NCUA’s 2008 rule that permitted a credit union to qualify as a LICU if it could establish that a majority of its members met a low-income formula. Do you believe the IFR achieves NCUA’s stated intent? If not, can you suggest an alternative approach that would achieve NCUA’s intent? Do you believe changes made by the IFR to the low-income rule were necessary?

  2. Are there any reasons why NCUA should continue to consider requests for a low-income designation based on a comparison of actual individual income data to median family income data?

  3. NCUA’s 2008 rule eliminated the requirement that credit unions apply for low-income designation, and instead provides that such designation will be determined by NCUA’s geo-coding software. NCUA’s software is intended to ensure that the same categories of data available for member income at a particular credit union are compared with like categories of statistical data on income from the Census Bureau. Do you support this new approach? Why or why not?

  4. In an effort to prevent further confusion based on the 2008 low-income rule, NCUA adopted this rule with an immediate effective date—rather than with at least a 30-day delay following publication in the Federal Register. Do you agree with NCUA that an immediate effective date was necessary?

  5. As an interim final rule, credit unions must comply with the changes upon the rule’s effective date. However, NCUA will accept comments on the IFR for a 60-day comment period. Do you agree with NCUA’s decision to adopt this as an IFR? Why or why not?

  6. Do you have any other comments or questions regarding NCUA’s low-income definition IFR?

Eric Richard • General Counsel • (202) 508-6742 •
Mary Mitchell Dunn • SVP & Deputy General Counsel • (202) 508-6736 •
Jeffrey Bloch • Assistant General Counsel • (202) 508-6732 •
Luke Martone • Senior Regulatory Counsel • (202) 508-6743 •