Removing Barriers Blog

CUNA Meets with CFPB to Discuss Payday Loan Alternatives
Posted July 15, 2015 by CUNA Advocacy

In March, the CFPB introduced proposals it is considering for rulemaking for payday and other small-dollar loans, and subsequently held a Small Businesses Review Panel as required by the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA) to discuss its proposal. Three CUNA members participated on the SBREFA panel, and CUNA sent a letter to the CFPB in response to it.

As a follow-up, Elizabeth Eurgubian, Jared Ihrig, Andy Price, and Leah Dempsey from CUNA and Faith Anderson from American Airlines Federal Credit Union met with the CFPB today to discuss the CFPB’s proposals under consideration.

During the meeting, CUNA provided the CFPB with some background information about credit unions participation in the National Credit Union Administration (NCUA) payday-alternative loan (PAL) program. CUNA expressed to the CFPB that it is important to credit unions that members and others in our communities have access to credit on the best possible terms, and we would like to see more credit unions involved in servicing the needs for short-term, small-dollar credit.  In accordance, CUNA cautioned the CFPB that adding more requirements to NCUA’s PAL program could have the effect of causing credit unions, of the one in seven that do participate in this market, to reevaluate their participation – and hinder other credit unions from entering this market.

CUNA emphasized that credit unions make very little profit on these types of loans and have a higher default rate for PAL loans than their typical loan, so any added roadblocks, even if they are not extremely burdensome, could have the effect of causing credit unions not to participate. In the meeting, CUNA urged the CFPB to consider our comments to the NCUA in 2012 about ways to make the PAL program easier for credit unions to participate in, rather than the alternative of making it even harder to participate in by adding additional requirements.

CUNA also explained that some credit unions have tailored their small-dollar loan programs to fit the needs of their members. Further, that the NCUA PAL program provides some leeway for credit unions to consider the different needs of their members and tailor these programs differently, and adding stringent requirements is not necessary.

During the meeting, CUNA expressed appreciation for the CFPB’s efforts to weed out the bad actors in this market, but expressed concerns about where consumers would turn if the ability of credit unions to offer PAL loans was restricted.

CUNA will continue to engage with the CFPB about this rulemaking and will urge regulators to allow credit unions to have the ability to increase their participation in serving members in need of short-term, small-dollar credit.