Wednesday, August 8, 2012
The Drought and Expansion of CU Business Lending
"You never let a serious crisis go to waste." Rahm Emanuel
As part of an initiative to assist drought-stricken states, the NCUA and the Obama Administration on August 7th announced that 1,003 credit unions are now eligible for a low-income designation, which permits unlimited lending to businesses.
The Federal Credit Union Act provides low-income designated credit unions with an exception to the member business loan cap of 12.25 percent of assets.
Rather than applying for the low-income designation, NCUA sent letters to credit unions notifying them that they were eligible for the low-income designation. All the credit union has to do is opt-in to receive the low-income designation.
The NCUA also intends to assess eligibility each quarter and then notify any newly eligible credit unions of their ability to receive low-income designation.
In addition to unlimited business lending authority, the receipt of low-income designation will allow the credit union to accept non-member deposits and access supplemental capital.
It is estimated that nearly half of the credit unions eligible for low-income designation are headquartered in states identified as having extreme drought conditions.
So, half of the credit unions are in states that are not affected by the extreme drought.
This agency is clearly taking advantage of the opportunity the drought provided.
Read NCUA’s press release. Read the White House Fact Sheet.