Removing Barriers Blog

Advocacy Efforts Begin on CFPB Small Dollar Rule
Posted June 27, 2016 by CUNA Advocacy

Today we sent two letters to regulators expressing serious concerns about the CFPB’s more than 1300-page rule for Payday, Vehicle Title, and Certain High-Cost Installment Loans. Our letters to the directors of NCUA and CFPB both stressed that this proposed rule sweeps in consumer friendly credit union small dollar and other covered loan products. We also produced an analysis of this rule, which outlines several areas where credit union products could be impacted.

In a letter sent in conjunction with the Independent Community Bankers of America, we point out to the CFPB that the proposed rule, if finalized in its current form, would unquestionably disrupt lending by credit unions and community banks, despite the CFPB’s statements that it was not their intention to do so. 

The letter notes that if it was actually the Bureau’s intention for depository institutions to serve more consumers in need of short term, small dollar loans, the proposed rule falls short of that goal and will almost certainly cause credit unions and community banks to exit this marketplace. 

The letter also thanks CFPB for recognizing the need for consumer friendly products from depository institutions, but also states that these exceptions need to be much broader in order to meaningfully achieve the goal of ensuring credit unions and community banks remain in this market. 

We  also sent a letter to NCUA seeking their assistance in protecting credit union products from CFPB compliance and regulatory burdens. 

The letter urges Chairman Metsger to carefully consider whether the proposal would disrupt existing lending by credit unions, and asks him to discuss the impacts with Director Cordray. We also shared our concerns that the proposed rule appears to sweep in auto refinance loans, which are not similar to payday or small dollar loans. 

We also noted that credit union loans do not fit into one specific category subject to a lengthy list of requirements. We are worried that if credit unions and other depository institutions are regulated out of this market, our members could be left with worse options, such as the unregulated and unlicensed predatory lenders. 

We are currently seeking widespread feedback from credit unions about how the CFPB’s small dollar rule could impact credit union products and services, and we will continue to educate the Bureau about problems this rule could cause for credit unions and their members.