NCUA Chair Rick Metsger wrote to the Consumer Financial Protection Bureau this week strongly recommending the bureau include a blanket exemption for Payday Alternative Loans (PALs) from its short-term, small-dollar proposal. CUNA has urged the bureau to exempt loans made through the PAL program, and wrote to the NCUA in June about concerns that the proposal would discourage credit union participation in the PAL program.
“The CUNA/league system appreciates NCUA weighing in on this important matter and standing up for the needs of credit union members across the country. According to NCUA, federal credit unions issued almost $125 million in PALs just in 2015, which showed an increase of 7.2% from the fourth quarter of 2014,” said Jim Nussle, president/CEO of CUNA. “We agree with NCUA that the bureau should consider a complete PALs exemption in their final payday lending rule, so as not to impede this important growth and service to members.
“We also appreciate the NCUA’s recognition and education of the CFPB that other conditional exemptions and parts of the CFPB’s proposal are not workable for credit unions, and that the CFPB’s proposal needs reform to ensure that credit union members can continue to rely on credit unions for safe and affordable alternatives,” Nussle added.
In his letter, Metsger expressed the same concerns CUNA has raised with the proposal, that it would negatively impact the availability of consumer-friendly products.
“While the proposed rule included a conditional exemption for PALs compliant loans, it would nevertheless increase compliance burdens for credit unions and potentially divest NCUA of the flexibility to adjust its rule as it sees fit to reflect the unique characteristics of credit unions,” the letter reads. “
“As the bureau itself acknowledges, it ‘has not observed evidence that lenders making loans under the NCUA [PALs] program participate in widespread questionable payment practices.’ The Bureau should therefore defer to determinations of the FCU prudential regulator about this product.”
The NCUA also requested adjustments related to other exemptions discussed in connection with the proposed rule, including that the bureau: