WASHINGTON (7/17/15)--CUNA staff met with the Consumer Financial Protection Bureau (CFPB) this week to discuss the bureau’s proposals under consideration regarding payday and small-dollar loans.
During the meeting, CUNA staff provided the bureau with information on credit unions’ role in combating abusive payday lending practices.
“We reminded the CFPB that credit unions are a positive alternative--not the bad actors--in the payday lending market. So credit unions should not be the focus of any new regulations targeted to problems in the market,” said Elizabeth Eurgubian, CUNA deputy chief advocacy officer. “As member-owned financial cooperatives, credit unions are in a great position to help their members with loan terms that are far better than predatory lenders. Any additional restrictions could leave consumers without the credit union option.”
CUNA told the CFPB that it would like to see more credit unions involved in servicing the need for short-term, small-dollar loans, and that adding more requirements could cause credit unions to re-evaluate offering products such as the National Credit Union Administration’s payday alternative loan (PAL) program.
One in seven credit unions participates in the PAL program, which places a cap on application fees, interest charged and the number of loans a member can get within a given time period.
CUNA emphasized that these types of loans generally are offered as a service, not to make profit, and PALs have higher default rates than typical loans. Credit unions generally tailor their small-dollar loan programs to fit the needs of their members, and the PAL program provides leeway for credit unions to consider individual member needs.
Going forward CUNA will continue the engage with the CFPB regarding potential payday lending rulemaking, and will urge regulators to allow credit unions to have the ability to increase their participation in this market.
CUNA wrote to the bureau in June regarding several payday lending proposals that were circulated at the CFPB’s Small Business Advisory Review Panel. Three CUNA members also participated in the panel.
Eurgubian and Jared Ihrig, chief compliance officer, attended this week’s meeting on CUNA’s behalf, as well as Andy Price and Leah Dempsey, senior directors of advocacy. Faith Anderson, vice president/general counsel at American Airlines FCU, Fort Worth, Texas, also attended.