The study on payday lending released this morning by the Consumer Financial Protection Bureau (CFPB) reinforces concerns of the Credit Union National Association (CUNA) about less- or non-regulated actors in the financial marketplace, and the problems credit union members can face when they are forced to turn to them.
The bureau is expected to issue a proposed rule soon on payday lending, otherwise known as short-term, small-dollar lending, and CUNA has continually urged the CFPB to assure that this, and other future rulemakings, do not impact credit union products and services which are usually consumers' best option.
“The CFPB’s report today highlights the concerns credit unions have been voicing to the bureau about when consumers are forced to turn to inferior products such as less, or nonregulated, online payday lenders,” said CUNA President/CEO Jim Nussle said. “As opposed to offshore, or online payday lenders, credit unions know their members and work with them to navigate through difficult financial situations. It is essential that CFPB rulemakings do not stand in the way of credit unions' ability to continue to offer the diverse products and services that consumers want and need such as free checking accounts, so that consumers can turn to their local credit union--not predatory lenders--during times of distress."
“[CFPB] Director [Richard] Cordray has repeatedly publicly stated that credit unions are the responsible lenders and the responsible financial institutions in the industry,” he added.
Cordray made those remarks as recently as this year’s CUNA Governmental Affairs Conference in February.
“‘Through the shared values of putting people first, the Consumer Bureau and the credit unions are working to do right by people and make further strides for those we serve…Credit unions made consumer protection ‘job one’ long before our agency came to be, and we at the Consumer Bureau are well aware of it,” Cordray said.
He later added, “If you have not gotten my point by now, let me say as bluntly as I can that I believe credit unions and the Consumer Bureau have much ground in common. We both want to see a world where consumers understand their options, weigh their choices carefully, and make sound decisions. A more educated consumer is a central tenet of our mission. We want people to be comfortable and confident when they consider mortgages, credit cards, checking accounts, small-dollar loans, and a host of other financial products and services.”
“CUNA is hopeful that any future CFPB rulemaking addresses irresponsible payday lenders while preserving credit unions’ ability to provide products and services that their members want and need,” said Nussle. “As Director Cordray has alluded to on numerous occasions, credit unions are the solution, not the problem. We urge the CFPB to keep its focus on the problem actors.”
Cordray acknowledged earlier this month before the Senate Banking Committee that the federal credit union Payday Alternative Loan program would be exempt from the CFPB’s upcoming rulemaking.
“Credit unions do offer a small-dollar product, called a PAL product, it is blessed into law. We think it’s a good product and we want to make sure there’s room for that under any regulations we adopt,” he said.
CUNA has urged the CFPB to exempt all credit union products from this rulemaking including those at state-chartered credit unions, to assure that credit unions can continue to remain an alternative consumer friendly option for consumers in need of small-dollar loans.