CUNA continues to analyze the Consumer Financial Protection Bureau’s (CFPB) 1,300-plus page proposal on short-term, small-dollar loans. The CFPB has agreed to brief CUNA members on the proposal, and CUNA is currently working to schedule the briefing.
The CFPB’s proposal adds restrictions on payday, title, and high-cost installment loans that meet certain requirements.
“This rule is incredibly complicated with a lot of moving parts. We’d like to see a rule that will not only allow credit unions to remain in the market but also encourages even more credit unions to fill the needs consumers have for small dollar credit, we’ll be carefully looking at the proposal and working with the CFPB to educate them about how the rule could detrimentally impact consumer friendly credit union products if not properly tailored,” said CUNA Chief Advocacy Officer Ryan Donovan.
Donovan added that an early concern is potential compliance issues, and the additional burdens that would mean, particularly for small credit unions with limited compliance resources.
CUNA appreciates the CFPB’s recognition that it can use its authority under Section 1022 of the Dodd-Frank Act to “conditionally or unconditionally exempt any class of covered persons, service providers, or consumer financial products or services.” CUNA has been urging the agency to use Section 1022 to tailor its rules to target the bad actors in the financial services marketplace, and not to add to the already burdensome regulations that credit unions face in the wake of the financial crisis.
The rule also praises the credit union lending model as an ideal that should be followed by others in the industry.
When it comes to a final rule, CUNA believes a complete exemption for Payday Alternative Loans (PALs) and other credit union products must be present. Comments are due on the proposal Sept. 14.
The CFPB conducted a field hearing Thursday in conjunction with the proposal’s release. Credit union witness and CUNA member Keith Sultemeier, president/CEO of Kinecta FCU, Manhattan Beach, Calif., presented the credit union perspective. He said that overregulation of these types of products will cause credit unions to refrain from offering them in the future.