CUNA advocates for PAL change to increase consumer access

March 26, 2020

CUNA recommends NCUA issue an interim final rule on Payday Alternative Loans (PALs) to ensure credit unions have the flexibility necessary to meet members’ needs during the coronavirus disease (COVID-19) pandemic. Specifically, a rule eliminating the requirement that a borrower “be a member of the credit union for at least one month” before receiving a PAL I.

“In contrast, the one-month membership requirement does not exist for the recently adopted PALs II program, CUNA’s letter reads. “In this instance, the agency has “good cause” to bypass the Administrative Procedure Act’s notice and comment requirement and issue an interim final rule because the rulemaking would be made in response to an emergency situation.”

“We believe the mandated waiting period for PALs I is unnecessary and, given the fast-moving nature of the current crisis, could ultimately hinder the ability of new credit union members to access the full suite of small-dollar loans available to meet their needs,” the letter added. “This action would also be consistent with the spirit of the joint statement encouraging financial institutions to work with borrowers and to offer responsible small-dollar loans.”

As the impact of COVID-19 is felt across the economy, CUNA also said “a consumer in financial distress engaging with their local credit union and inquiring about membership for the first time should not be arbitrarily disadvantaged in the current environment.”

NCUA issued a letter to credit unions Thursday in conjunction with a federal financial regulators statement encouraging responsible small-dollar lending due to the COVID-19 pandemic.