A community development credit union (CDCU) is a credit union with a special mission of serving low- and moderate-income people and communities.
More than sixty years ago, a small number of credit unions were founded with the specific mission of serving low-income and minority communities beyond the reach of banks and mainstream credit unions. These “community development credit unions” (CDCUs) specialize in serving populations generally considered the hardest to serve, including low-income wage earners, recent immigrants, and people with disabilities.
CDCUs are:
- Nonprofit and tax-exempt (but not a charity)
- Cooperatively owned and governed -- one member, one vote
- Government-regulated, fully insured financial institutions
CDCUs provide:
- Fairly priced loans, including to members with imperfect, limited or no credit history
- A safe place to save
- A place to conduct transactions at reasonable cost
- Financial education and counseling for its members
- Products, services and support that can help members to free themselves from high-cost and predatory debt, gain control over their personal finances, and achieve economic independence.
CDCUs offer an economic lifeline to low-income communities that have been abandoned by commercial banks and targeted by high-priced check cashers and predatory lenders. CDCUs also provide a platform to serve the broader community through outreach to disadvantaged populations and neighborhoods, participation in government programs, and partnerships with the private-sector in community revitalization efforts.
Every CDCU was founded in the belief that those who work hard deserve the opportunity to achieve financial security. Each CDCU can tell a story of beating the odds, helping the vulnerable, and pursuing a mission that is as large as the American Dream and as specific as the future of a single child.
CDCUs and "Low-income Credit Unions"
Often, the term "community development credit union" is used interchangeably with "low-income credit union." The great majority of CDCUs have low-income designation -- however, most credit unions with low-income designation are not CDCUs.
Here's the distinction:
- Designation as a "low-income" credit union must come from the National Credit Union Administration (or occasionally, a state regulatory agency). This designation gives a credit union certain special powers, such as the right to accept non-member deposits and secondary capital. Many low-income designated credit unions serve narrow fields-of-membership (for example, groups of employees), rather than their broader communities.
- Only members of the Federation are "community development credit unions." Community development credit unions have access to the wide range of services and programs offered by the Federation. However, designation as a CDCU does not, by itself, give a credit union the legal power to accept non-member deposits or secondary capital; low-income designation is still required.
CDCUs and Community Development Financial Institutions (CDFIs)
CDCUs make up an important segment of the community development financial institutions movement. The Federation was a co-founder of the CDFI Coalition, and our Executive Director, Clifford Rosenthal, served as the first elected chairman of the independent Coalition of CDFIs.
The Federation regards all CDCUs as CDFIs within the meaning of the CDFI Act. All CDCUs are eligible to apply for CDFI certification from the U.S. Department of Treasury's CDFI Fund, and more than 90 CDCUs currently enjoy that standing.
