Removing Barriers Blog

Cordray Discusses Forthcoming Overdraft and Small-dollar Loan Rulemakings in GAC Speech
Posted March 06, 2016 by mcarew

In his speech before CUNA’s GAC, CFPB Director Cordray also addressed rulemakings which the Bureau is expected to propose this year and next, including overdraft protection and small-dollar lending.

He talked about some “new ideas” to help consumers that are relying on overdraft services and small-dollar loans. Credit unions have been coming up with different ways to serve members in need of these types of services for many years, and have been working to tailor products to the needs of their members, some of who are facing financial distress. This innovation did not stem from regulation in these areas, but by simply talking with members, finding out what they like and need, and working to offer those services. It is woven into the credit union mission. In the case of overdraft services credit union members continually express satisfaction with this service as one of their options, which is reflected in the CFPB’s own complaint data.

In the speech, Cordray continued to indicate that he would like to see more credit unions in the small-dollar loan market. CUNA has expressed to the CFPB again and again that the best way to make this happen is to allow credit unions to have more flexibility in this market, not less, and not to create confusing compliance burdens that keep credit unions from being able to offer these products. We agree with his concerns about assuring access to safe credit options, and there is no question that credit union consumer friendly payday alternatives are one of the best choices for consumers. We hope the CFPB considers exempting credit unions from its forthcoming payday, small-dollar rulemaking so that they are not once again regulated out of another market.

Cordray ended his remarks with praise of credit unions work particularly in financial education, protecting seniors, and providing diverse product and service offerings. He stated, “If you have not gotten my point by now, let me say as bluntly as I can that I believe credit unions and the Consumer Bureau have much ground in common.  We both want to see a world where consumers understand their options, weigh their choices carefully, and make sound decisions.  A more educated consumer is a central tenet of our mission.  We want people to be comfortable and confident when they consider mortgages, credit cards, checking accounts, small-dollar loans, and a host of other financial products and services.”

We could not agree more with this sentiment, and we hope to see policy makings coming out the Bureau that actually reflect this sentiment and treat the unique structure of credit unions differently than the structure of big banks and non-bank lenders.