NCUA passes PAL II, bylaws, supervisory cmte audit rules

September 19, 2019

The NCUA board passed its final Payday Alternative Loan (PAL) II rule Thursday, as well as final rules on bylaws and supervisory committee audits. Representatives from the Kentucky Credit Union League, Cooperative Credit Union League, Cornerstone Credit Union League, Credit Union Association of the Dakotas and the Northwest Credit Union Association were in attendance at the meeting, and were acknowledged by NCUA Chairman Rodney Hood.

The PAL II final rule does not replace the existing PAL, but allows additional short-term, small-dollar options for federal credit unions.

The final rule:

  • Allows a federal credit union to offer a PAL II loan up to $2,000;
  • Requires PALs II loans to have a minimum term of one month with a maximum of 12 months (PALs are limited to six months);
  • Allows a federal credit union to make a PALs II loan immediately upon the borrower’s establishing membership; and
  • Restricts a federal credit union to offering only one type of PALs to a member at any given time;
  • Prohibits a federal credit union from charging any overdraft or nonsufficient funds fees in connection with any PAL II payment drawn against a borrower’s account.

It will become effective 60 days after publication in the Federal Register.

The final rule on federal credit union bylaws was adopted with a CUNA-supported change to retain the existing quorum requirement for meetings.

The rule will become effective 90 days after its publication in the Federal Register.

The final supervisory committee audit rule is designed to update outdated provisions of the regulation and provides federal credit unions with assets of less than $500 million with added flexibility.

Specifically, it:

  • Replaces the outdated Supervisory Committee Guide Audit alternative to a financial statement audit and replaces it with a simplified appendix to the regulation;
  • Eliminates two types of audits federally insured credit unions seldom use; and
  • Eliminates the 120-day deadline for receiving a third-party audit report and gives credit unions the ability to negotiate a delivery date.

The rule rill be effective 90 days after publication in the Federal Register.

The board also heard an update on the National Credit Union Share Insurance Fund for the quarter ending June 30.

Additional meeting details can be found on CUNA’s Removing Barriers Blog.