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In response to the CFPB’s Request for Information (RFI) on Payday Loans, Vehicle Title Loans, Installment Loans, and Open-End Lines of Credit, CUNA filed a letter outlining some additional concerns about CFPB actions.
In our letter, CUNA noted that both covered and non-covered loans could be detrimentally impacted by the CFPB’s overly broad proposed rule that sweeps in consumer friendly credit union small dollar loans and other products.
CUNA said some credit unions have loans that would be covered loans and others that would not be, but they cannot take on the compliance burden and resource drain of having separate systems, processes, training and forms for different types of consumer friendly alternatives subject to several different regulatory schemes. The letter noted that predatory lending is contrary to the very nature of credit unions, that both credit union covered and non-covered loans are not predatory, and that chilling any credit union lending is not consumer friendly.
The CFPB, in the proposal, questioned whether ancillary products can lead to consumer protection concerns. CUNA, alternatively, raised the question of whether limiting options for voluntary products is harmful to consumers. The letter outlined that consumers and credit union members that may be helped the most by ancillary products may be those with low or moderate incomes who have limited options if an unplanned event should occur.
The letter also described other consumer friendly credit union services that should not be detrimentally impacted, such as cash-out loans secured by auto purchases and payroll savings plans. And, CUNA opposed the CFPB’s decision to exempt pawn loans from its small dollar proposed rule instead of consumer friendly credit union products and services.
CUNA also questioned CFPB's recent actions surrounding debt collection. CUNA expressed concern with the CFPB’s proposal to ignore the statutory rights in the FCUA which expressly authorize FCUs to impress and enforce a lien upon the shares and dividends of any member. CUNA also highlighted concerns surrounding the recent enforcement action against a credit union, which created new requirements that conflict with longstanding statutory precedent in the FCUA and NCUA guidance.
CUNA noted it is troubled by any circumstances in which the CFPB faults credit unions, when they are complying with current law, using its UDAAP authority. And, we pointed out that the United States Court of Appeals recently objected to this type of action in the PHH case.
In the letter, we also encouraged the CFPB to listen to feedback from other agencies and regulators on concerns they have about changes in the marketplace this rule could cause that would affect consumer protection. Specifically, we highlighted letters from the NCUA, SBA Office of Advocacy, and NASCUS that were troubled with how the CFPB’s proposed rule could detrimentally impact credit union lending, which has the ultimate effect of harming consumers.
CUNA's letter also urged the CFPB to give more attention to the positive aspects of strengthening consumer relationships with credit unions. The letter noted that the best-case scenario for a consumer is if their relationship with a credit union expands far beyond the life of a small dollar loan. We also expressed the serious concern that the proposed rule could strain relationships with consumers on the fringes of being members by making it more difficult for credit unions to serve their needs.
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