CUNA continues to advocate for changes to the Consumer Financial Protection Bureau’s (CFPB) short-term, small-dollar loan proposals with separate letters sent to NCUA and CFPB Monday. The CFPB’s proposal would add restrictions on payday, title, and high-cost installment loans that meet certain requirements.
In the letter to NCUA Chair Rick Metsger, CUNA President/CEO Jim Nussle asks that the agency consider the full impact of the CFPB proposal on credit unions' small-dollar lending programs.
“We are quite concerned that the Bureau’s proposal sweeps in and threatens the stability of these consumer-friendly products offered by credit unions. This action, in our view, is uncalled for given credit unions’ history of, and approach to providing short-term, small-dollar credit to their members,” Nussle wrote. “We have specific concerns that the proposal will discourage credit union participation in the NCUA’s Payday Alternative Loan (PAL) program because of the additional compliance and regulatory burdens it places on credit unions participating in it.”
Credit unions offering short-term, small-dollar products generally do so as a member service, and in fact can often be used to help members get out of the sort of predatory loan cycles the CFPB’s proposal intends to address.
In addition to increased burden’s effect on credit unions’ PAL programs, CUNA has other concerns:
CUNA asks Metsger to address the proposal's impact on credit unions with CFPB Director Richard Cordray and to encourage Cordray to use the bureau’s statutory powers to ensure the rule does not disrupt consumers’ ability to access safe and affordable short-term, small-dollar credit from credit unions.
In the separate letter to the CFPB, signed by Nussle and Independent Community Bankers of America President/CEO Camden Fine, CUNA makes similar arguments to Cordray about negative effects on consumers. The CFPB letter specifically cited the increased underwriting requirements.
“The requirements outlined in the proposed rule, including the exceptions to the general rule, are extremely complex and prescriptive, and inconsistent with how credit unions and community banks that know their members and customers underwrite a loan that can be for a relatively small amount of money,” the letter reads.
“Small dollar loans provided by credit unions and community banks do not fit into one specific category and subjecting them to a lengthy list of requirements would undoubtedly significantly reduce consumer options for these loan products.”