CUNA backs proposed delay of payday rule, calls for changes

March 18, 2019

CUNA supports supposed the proposed delay of the compliance date for the Consumer Financial Protection Bureau’s (CFPB) payday lending rule, but also supports a delay of the entire rule, it wrote to the CFPB Monday. CUNA sent it letter in response to a proposed delay of the mandatory underwriting provisions to the rule to Nov. 19, 2020 (originally set for Aug. 19, 2019.).

CUNA believes the proposed delay would provide credit unions an opportunity to adequately prepare for implementation.

“Given the Payday Rule’s broad scope and the pending challenge to the rule’s legality in federal court, the Bureau should delay the rule in its entirety rather than merely delaying the ability-to-repay (ATR) provisions that are the subject of the rescission proposal,” the letter reads. “A delay of the entire rule is especially warranted if the CFPB intends to amend other aspects of the rule, such as the payments provisions, in the near term.”

CUNA believes the CFPB’s approach to regulating payday lending should be consistent with several broad objectives:

  • The rule should be tailored to focus on lenders who abuse consumers and entrap them in cycles of debt.
  • The rule should not inhibit credit unions from continuing to offer consumer-friendly emergency credit products to members in need. A solution could include using the Bureau’s exemption authority as credit unions have clearly set themselves apart from the actors the CFPB intends to rein in with the rule.
  • The pending rule should be revised in a manner that encourages more credit unions to enter the short-term, small dollar lending market, including:
    • Creating an express, broader exemption for credit union products using the Bureau’s exemption authority, and
    • Coordinating with the NCUA to ensure consistency with any changes to the Payday Alternative Loan (PAL) program, which currently benefits from an exemption under the current rule. The Bureau should seek to expand the PAL exemption should NCUA finalize its proposed PAL II program.

CUNA also continues to urge the CFPB to further examine and revise the rule to avoid any negative effects on credit unions’ small-dollar loans programs while still holding accountable non-depository payday lenders, especially those with histories of bad behavior.

The CFPB issued a separate proposal on additional changes to the rule, which CUNA will submit a separate letter on.