CUNA backs shield for Armed Services from payday lender

September 22, 2006

FOR IMMEDIATE RELEASE
Contact:
Patrick Keefe, CUNA Communications
(202) 508-6765
pkeefe@cuna.com

CUNA has told leaders of Senate and House committees on the Armed Services that it supports legislation shielding men and women of the military from unscrupulous payday lenders.

However, CUNA also pointed out the measure needs some “important clarifications,” specifically noting it should require that federal financial institution regulators such as the National Credit Union Administration (NCUA) have authority to implement the measure’s provisions applying to the institutions they regulate, and that regulators be given leeway to permit certain “reasonable fees” be excluded from a cap on fees and interest rates covered under the provision.

CUNA made its comments in letters to Senate Armed Services Committee Chairman John Warner (R- Va.), committee Ranking Member Carl Levin (D-Mich.), House Armed Services Committee Chairman Duncan Hunter (D-Calif.) and committee Ranking Member Ike Skelton (D-Mo.). The provision, advanced by Sen. Jim Talent, R-Mo., is contained in the Fiscal Year 2007 Senate Defense Authorization bill.

“A number of credit unions serve military personnel, working hard to ensure their military members receive well-tailored loans and other services at favorable rates,” CUNA President and CEO Dan Mica wrote. “Rather than seek an exemption from the amendment we support the Talent provisions. We are able to take this position because credit unions do not make the kinds of anti- consumer loans the amendment seeks to eliminate.”

The complete text of CUNA’s letter follows:

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September 21, 2006

Hon. John Warner, Chairman
Committee on Armed Services
United States Senate
Room 228, Russell Office Building
Washington, D.C. 20510-6050

Hon. Carl Levin, Ranking Member
Committee on Armed Services
United States Senate
Room 228, Russell Office Building
Washington, D.C. 20510-6050

Hon. Duncan Hunter, Chairman
Committee on Armed Services
U.S. House of Representatives
Room 2120, Rayburn Office Building
Washington, D.C. 20515-6035

Hon. Ike Skelton, Ranking Member
Committee on Armed Services
U.S. House of Representatives
Room 2120, Rayburn Office Building
Washington, D.C. 20515-6035

Hon. James M. Talent
United States Senate
Room 493, Russell Office Building
Washington, D.C. 20510-2506

Dear,

On behalf of the Credit Union National Association and in coordination with the Defense Credit Union Council, we strongly support the objectives of the amendment to the Fiscal Year 2007 Senate Defense Authorization bill to shield service men and women from unscrupulous payday lenders. By way of background, CUNA represents approximately 90% of our nation’s 8,800 state and federal credit unions that serve nearly 87 million consumers.

Credit unions in the United States were formed for the very purpose of providing an alternative to predatory lending and developing financial products that meet consumers’ needs without resorting to abusive rates and fees. A number of credit unions serve military personnel, working hard to ensure their military members receive well-tailored loans and other services at favorable rates. Rather than seek an exemption from the amendment we support the Talent provisions. We are able to take this position because credit unions do not make the kinds of anti-consumer loans the amendment seeks to eliminate.

We do seek some important clarifications concerning the amendment. There is no question that the DoD and Federal Trade Commission should have authority to develop regulations to implement this law for payday lenders that are not scrutinized by other agencies. However, we feel that federal financial regulators should have the authority to implement the amendment’s provisions and regulate the financial institutions under their purview. At the very least, DoD should be required to consult with the federal financial regulatory agencies such as the National Credit Union Administration in the rulemaking process, with enforcement for financial institutions residing with the federal financial regulators. We also think that financial regulators should be given latitude to permit certain reasonable fees to be excluded from the cap consistent with current federal law. Such a clarification will help avoid the unintended chilling effect on loan products with fair rates offered to military personnel by traditional lenders.

We know this legislation is on a fast track and appreciate your attention to our concerns. I would welcome the opportunity to discuss our recommendations if you have questions. All the best to you as you pursue the best interests of the men and women who serve our country in the military.

Sincerely,

Daniel A. Mica
President & CEO

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