New state law gives credit unions access to BDD program

ALBANY — A new state law allows credit unions to take part in New York’s banking development district (BDD) program. 

State lawmakers approved the bill earlier in 2019 and Gov. Andrew Cuomo signed it in December. The New York Credit Union Association (NYCUA) “strongly supported” its passage, per a news release on the association’s website.

The Assembly version of the bill was introduced by Assemblyman Kenneth Zebrowski, (D–New City), while Sen. Velmanette Montgomery (D–Brooklyn) introduced the Senate version.

“Passage of this law is a major victory for credit unions and a major victory for New Yorkers — especially those who reside in underserved and under-banked areas,” William J. Mellin, president and CEO of NYCUA, contended. “With this new law, more New Yorkers will have critical access to the credit union and financial system.”

New York created the BDD program in 1997 to encourage financial institutions to establish branches in “economically distressed” communities across the state that have a “demonstrated need” for banking services. 

Banks and trust companies have “largely underutilized” the program, NYCUA contends. At the same time, credit unions weren’t able to participate “due to the language” in the original legislation establishing the program.

Financial institutions that are approved for a BDD designation are eligible to receive up to $10 million in subsidized public deposits and other benefits, including below market-rate deposits from New York State. These deposits are intended to lower the financial risk that the branch may incur when opening in an underserved community, “usually” comprised of low- and moderate-income households.

The legislation also represents the “first time in state history” that credit unions are permitted to accept public deposits, NYCUA said. The organization “continues to advocate” for additional legislation that would expand credit union deposit access to state and local governments.