Low Income Credit Unions: Scam or No Scam
by Robert McGarvey
The NCUA lit this bonfire when in early May it tweaked the criteria for a credit union to win designation as a low-income credit union. That matters because an LICU gains significant flexibility in how it can do business, notably it can accept deposits from any source and gain exemption from aggregate loan limits on member business accounts.
Remember the NCUA change is a tweak, nothing more. What the regulator did was change the rules to allow counting of Post Office Boxes as addresses. Before, that was a no-go; only street addresses counted. It is believed this tweak will allow counting of more military personnel, many of whom are said to use PO Boxes as addresses.
You might think that in the midst of the nation’s worst economic collapse in 90 years, there would be applause for this NCUA broadening of the criteria for qualifying as a low-income credit union.
You would be wrong, however, because the Independent Community Bankers of America (ICBA) sees a Trojan horse conspiracy. They think credit unions are using the benign appearance of servicing low-income segments—which few oppose—to forward an agenda letting credit unions engage in “unbridled commercial lending.” Lots of it, in fact, complained ICBA in a statement by CEO Rebeca Romero Rainey, in which she implores Congress to review the NCUA action.
ICBA went on: “Today’s sudden National Credit Union Administration move to change its methodology in designating low-income credit unions benefits neither low-income Americans nor military personnel—but the largest, most growth-obsessed credit unions, which continue to be subsidized by taxpayers.
“The NCUA’s changes—made without a formal rule subject to public review and comment—is another example of this captive regulator expanding the powers of credit unions well beyond the limits established by Congress to justify their tax exemption.”
Ouch.