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Compliance Must CUs charge STS loan processing fee
WASHINGTON (10/25/10)—The National Credit Union Administration (NCUA) issued a new rule recently to allow credit unions to offer members small-amount, short-term (STS) loans, but there has been some confusion about fees, according the Credit Union National Association’s (CUNA's) October Compliance Challenge. ABC FCU, says the Challenge, would like to offer the STS loans to members as an alternative to predatory payday lending available in the area. The credit union lending officer has read CUNA’s final rule analysis and is aware that credit unions are allowed to charge a maximum application fee of $20 to be used for processing costs. However, the credit union doesn’t normally charge fees for unsecured loans and would prefer not to do so. Does it have that flexibility for this product? Yes, it does. Although CUNA had to contact the NCUA to get clarification on this particular issue because the rule, unfortunately, does not specifically address whether or not the application fee is voluntary. In fact, some of the language of the regulation seems to suggest that a credit union would be required to charge the application fee to all members granted an STS loan in order to charge the maximum rate (28%) for the loans. Bit the NCUA clarified that the application fee is voluntary. However, iif a credit union opts to charge the fee, the maximum fee permissible for an STS loan is $20.
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