WASHINGTON (4/25/12)--Credit unions and the Credit Union National Association (CUNA) are committed to providing a safe and affordable alternative to predatory payday lenders, and credit unions across the country have implemented various programs in order to provide individuals in their communities an alternative to high-priced payday lenders, CUNA said in a comment letter to the Consumer Financial Protection Bureau (CFPB).
The comment letter followed a recent CFPB hearing on payday lending. That hearing featured testimony from Daryl McMinn, vice president of operations of Listerhill CU of Sheffield, Ala., and various payday lending experts, regulators, and financial industry representatives.
In the comment letter, CUNA Assistant General Counsel Luke Martone said CUNA supports the ability of credit unions to provide beneficial short-term, small amount loans as alternatives to predatory payday lending, which have "no place in the financial marketplace."
Payday loans from federal credit unions are generally limited to an annual percentage rate of no more than 18%. However, under the National Credit Union Administration's (NCUA's) short-term, small amount loan program, federal credit unions may offer certain short-term loans at an APR as high as 28%, provided certain terms are met.
To offer the NCUA-approved higher loan rate, the loan principle must be between $200 and $1,000, and the term of the loan must be between one and six months. Fees tied to the loan may not exceed $20, and lenders may not roll over the short-term loans.
For the full comment letter, use the resource link.