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The U.S. Small Business Administration Office of Advocacy (SBA) filed its comment letter on the CFPB’s Payday, Vehicle Title, and Certain High-Cost Installment Loans. The SBA conducted three roundtables in the month of September to determine the impact of the rule on small businesses. CUNA has been advocating for credit unions on this issue for months. Many credit unions and Leagues, together with CUNA attended these roundtables which also included representatives from payday lenders, online lenders, banks, tribal representatives, trade associations representing small businesses, and various government representatives.
SBA paid particular concern to the impact on credit unions noting that the CFPB needs to recognize the NCUA’s expertise in the area of credit unions and exempt small credit unions from the proposed rule. It further noted that the proposed rule adds unnecessary complexity and new compliance burdens to consumer friendly credit union small dollar loans.
The SBA was highly critical of the CFPB’s estimates of the impact on small businesses as well as the impact on consumers and urged the CFPB to make significant changes to its approach. SBA clearly articulated its concern with the rule stating that “the CFPB has underestimated the potential economic impact of this rulemaking on small entities”. SBA is concerned that the proposed rule may force legitimate businesses to cease operation and that imposing the proposed regulation will not alleviate a consumer’s financial situation. SBA notes “the consumer will still need to pay his/her bills and other expenses. Imposing these strict regulations may deprive consumers of a means of addressing their financial situation.”
Other issues addressed by the SBA in its letter are as follows:
The Ability-to-Repay requirements will be burdensome and calls for them to be eliminated;
Requests the credit check requirement to be eliminated citing the costs to consumers and it being an unnecessary hurdle for lenders;
Encourages the CFPB to reconsider the 30-day cooling off period or alternatively, implementing a shorter cooling off period.
Encouraged the CFPB to provide an exception for emergency situations and provide clear guidance on what qualifies as an emergency;
Encouraged the CFPB to recognize the states’ ability to make the appropriate choices for their citizens and exempt from the rule small businesses;
Encouraged the CFPB to include an adequate estimate of the aggregate impact that the Ability-to-Repay requirements will have on the revenue stream of small entities;
Called for CFPB to reconsider its proposal and develop requirements that protect consumers without jeopardizing their access to legitimate credit.
Requested a minimum of 24 months for implementation;
CUNA thanks all the credit unions, Leagues, and other partners that attended these roundtables.
A link to the letter can be found here.
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