ABOUT THE PROPOSED COMMUNITY HOPE FEDERAL CREDIT UNION:
Community Development Resources is organizing a new Low-income federal credit union in the Lincoln, NE community. We have received preliminary approval from the National Credit Union Administration (NCUA) to form a federally chartered low-income credit union, a designated trade area (see map below), and a proposed name.
WHAT IS A LOW-INCOME CREDIT UNION?
Low-income designation (LID) is a classification for credit unions that meet certain membership criteria. The classification entitles these credit unions to legislated benefits. A federal credit union qualifies for LID when a majority of its membership (50% + one member) qualifies as Low-Income Members.
“Low-income members” includes members with a family income 80% or less than the median family income for the metropolitan area where they live or national metropolitan area, whichever is greater. Members enrolled as students in a college, university, high school, or vocational school also qualify.
WHY IS BEING A LID IMPORTANT?
LID credit unions have access to benefits unavailable to non-LID credit unions. These benefits are designed to help the credit unions serve members recognized to have challenges accessing mainstream financial products and services.
Low-income designated credit unions may:
- Accept non-member deposits
- Participate in the NCUA Community Development Revolving Loan Program. This program provides both loans and grants for technical assistance.
- Offer secondary capital accounts
- Qualify for exception from the aggregate loan limit for member business loans.
PROPOSED CREDIT UNION DESCRIPTION AND IMPACT:
The proposed Community Hope Federal Credit Union (CHFCU) will be a member-owned, federally insured financial institution whose purpose is to promote valuable access to financial services for people under-served and unserved by traditional financial institutions and reduce the influence of predatory lending (Payday loans) in Lincoln. Additionally, the proposed Community Hope Federal Credit Union will provide, facilitate and support financial literacy programs that educate credit union members and non-members in the community of Lincoln to the disciplines of financial independence and wealth creation.
The proposed CHFCU’s designated trade area is a contiguous 12 census tract area within the core of the City of Lincoln. Initial products will include share drafts, savings accounts, personal short-term loans, used car loans, and check cashing services. Future products will include new car loans, home equity loans and residential mortgages.
The proposed CHFCU will reduce the influence of predatory Payday Loans and its devastating impact on families’ health and financial well-being in Lincoln. Payday loans have multiple features that make them dangerous for borrowers: a lack of underwriting for affordability; fees convert to annual percentage rates (APR) averaging 460%; a quick repayment period due on their next payday at which time the loan is due in full; and collateral provided by personal check, which gives lenders direct access to borrower bank accounts. Further, Payday loans are simply unaffordable: A typical payday borrower making $35,000 annually does not have enough income to repay their loan and cover other monthly expenses. Subsequently they become caught in the “payday lending debt trap” for months at a time. The proposed CHFCU’s mission is to stop debt-trap lending by offering affordable alternatives and financial literacy training.
PROJECT FUNDING NEEDS:
CDR as Organizer is seeking donated funds and commitments for uses noted below:
Donated funds for Start-Up Costs $ 95,000
- Estimated start-up costs include Electronic Data Processing equipment/leases,
Research & Development, Furniture, Fixtures & Equipment, and Marketing.
Commitments for Operating Reserve $ 400,000
- Estimated minimum to cover 3 years’ operating costs – projections
based on NCUA directive ________
Total Funding Goals: $ 495,000
ADDITIONAL FUNDING OPPORTUNITY:
Contributions to CDR for the benefit of the credit union project can qualify for up to $10,000 of Nebraska Income Tax Credits awarded under the Community Development Assistance Act (CDAA) through the Nebraska Department of Economic Development. CDAA empowers the Department of Economic Development to distribute a 40 percent state tax credit to businesses, corporations, insurance firms, financial institutions, or individuals that make eligible contributions of cash, services or materials to approved community betterment projects.
An example of CDAA tax credit benefits for a $25,000 contribution:*
- $10,000 state tax credit
- $8,500 state and federal tax savings as a result of contribution
- $6,500 net contributor investment
* Example above varies with each contributor and amount contributed. Please check with your tax advisor to verify implications for your contribution.
If you would like to donate, are interested in the Nebraska Income Tax Credit, would be interested in a personal presentation, or if you would like to receive further information about the proposed Community Hope Federal Credit Union contact:
Mark Koller, CEO/Manager
Community Development Resources (CDR) is a 501 (c)(3) nonprofit organization located in Lincoln, Nebraska. It is the mission of Community Development Resources to create economic opportunity and strong communities by providing capital and technical assistance to develop and fortify small businesses. CDR is a certified Community Development Financial Institution (CDFI), as designated by the U.S. Department of Treasury’s CDFI Fund.
For more information on CDR contact: