Table of contents
For credit unions committed to financial inclusion, maintaining their Low-Income Designation (LID) is essential. LID status unlocks significant benefits, such as access to non-member deposits, exemption from the member business lending cap, being able to count subordinated debt toward capital requirements, and eligibility for specialized grant programs. However, to continue receiving these advantages, credit unions must ensure they remain compliant with NCUA requirements.
In this guide, we’ll cover the fundamentals of LID, what happens if a credit union is at risk of losing its designation, and strategies to proactively maintain compliance.
Understanding Low-Income Designation
A credit union qualifies for Low-Income Designation when more than 50% of its actual or potential members meet low-income criteria as defined by the National Credit Union Administration (NCUA). While there are multiple ways a member can qualify as low-income, the most straightforward method is through geographic analysis—determining whether they reside in areas designated by the NCUA as low-income.
To assist credit unions in evaluating their LID eligibility, the NCUA provides a LID Workbook that lists LID-qualifying counties, census tracts, and block groups. Credit unions seeking more details on qualification requirements and associated benefits can also refer to our comprehensive LID resource.
What Happens if a Credit Union Loses LID Status?
To ensure ongoing compliance, the NCUA’s Office of Credit Union Resources and Expansion (CURE) regularly reviews LID credit unions. If a credit union no longer meets the necessary criteria, the NCUA issues a written notification stating the designation is at risk.
However, LID credit unions don’t lose their designation immediately. The NCUA allows a five-year grace period, during which the credit union retains all LID benefits and has the opportunity to take corrective action to regain compliance.
Strategies for Retaining LID Status
If a credit union receives notification from the NCUA that it no longer meets LID requirements, proactive measures can help restore compliance. The key is increasing the proportion of low-income-eligible members, and there are several strategic approaches to achieve this:
1. Repositioning Product Offerings to Serve Low-Income Members
Tailoring financial products and services to better meet the needs of low-income communities is a crucial strategy. Credit unions can introduce or expand offerings such as:
- Low-cost checking and savings accounts – Accessible financial services with minimal fees
- Small-dollar loans & Payday Alternative Loans (PALs) – Short-term financing options that provide affordable credit
- Financial counseling and education – Programs that help members manage debt, build savings, and improve financial literacy
- Savings matching programs – Incentivizing savings with credit union-matched contributions
2. Targeted Marketing to Low-Income Communities
Because geographic location is one of the primary criteria for LID qualification, credit unions can focus marketing efforts on low-income designated areas. Digital advertising, direct mail campaigns, and community outreach in these areas can help attract more eligible members.
3. Purchasing Loans & Memberizing Borrowers
Credit unions can acquire existing loans from other lenders whose borrowers reside in low-income-designated areas. By purchasing such loans and onboarding the borrowers as members, credit unions can simultaneously increase their LID-eligible membership base and grow their loan portfolio.
How CUCollaborate Helps Credit Unions Retain LID Status
We provide credit unions with data-driven solutions to monitor and maintain their LID status. Our services include:
1️⃣ Live LID Monitoring with AnalyzeCU
AnalyzeCU is a powerful data consortium and analytics platform that transforms membership data into actionable insights. By uploading membership data regularly, credit unions can generate LID Reports and track real-time changes to their low-income membership percentage.
2️⃣ Targeted Marketing Lists for LID Growth
Our team evaluates address lists to identify LID-qualifying households, ensuring marketing efforts are directed toward attracting new eligible members.
3️⃣ Forward-Flow Lending: A Scalable Strategy for LID Retention
One of the most effective ways for credit unions to increase their LID-eligible membership is by leveraging forward-flow lending opportunities. Through our partnership with the National Auto Loan Network (NALN), CUCollaborate helps credit unions expand their membership base while maintaining strong loan performance and operational efficiency.
Case Study: Using Auto Loan Refinancing to Retain LID Status
A Utah-based credit union facing potential loss of its Low-Income Designation (LID) needed a scalable strategy to increase its percentage of low-income members. The credit union partnered with NALN to refinance auto loans for borrowers in LID-eligible areas, providing borrowers with competitive rates while enhancing the credit union’s LID compliance.
Since launching the program in July 2024, the results have been significant:
- 🚗 Over 1,000 auto refinance loans funded, totaling $25 million
- 📊 More than 80% of borrowers qualified as LID-eligible, supporting compliance
- 💳 90%+ of loans onboarded with automatic ACH payments, ensuring strong repayment behavior
- 📑 NALN handled all lien perfection, reducing operational workload
- ⚡ Loan production ramped up in just 3-4 weeks, accelerating results
By targeting borrowers in LID-eligible areas, this partnership provided a consistent, high-quality pipeline of new members while ensuring loan performance remained strong.
How Forward-Flow Lending Supports Credit Union Growth
NALN’s forward-flow lending approach enables credit unions to:
✔ Attract LID-eligible members with reduced marketing costs
✔ Expand auto loan portfolios with seasoned, creditworthy borrowers
✔ Streamline operations by outsourcing borrower acquisition and lien processing
✔ Quickly scale up loan production—most credit unions begin seeing results within a 3-4 week launch period
By leveraging NALN’s targeted direct mail and digital outreach, credit unions can continuously onboard new members while maintaining their LID designation and growing their loan portfolios.
Ensure Your LID Compliance with CUCollaborate
Maintaining Low-Income Designation provides credit unions with significant regulatory and financial advantages, making it crucial to take proactive steps toward compliance. Whether you need real-time LID monitoring, targeted marketing solutions, or access to LID-eligible borrowers, CUCollaborate is here to help.
📅 Schedule a meeting with our team today to explore strategies for retaining your LID status and maximizing its benefits.
Low-Income Designation
