Removing Barriers Blog

House Hearing Provides Insights into Payday, Small-Dollar and Debt Collection Rulemaking
Posted March 18, 2016 by CUNA Advocacy

During the House Financial Services Committee hearing this week, CFPB Director Richard Cordray provided some details about forthcoming rulemakings including the Payday, Small-Dollar loan space, and the rule concerning the Fair Debt Collection Practices Act (FDCPA). 

In response to questions about the small-dollar loan rules expected within the next few months, Cordray indicated that he values credit union participation in the market. He stated, "We're also trying to make sure there are ample avenues that remain for small dollar lending to be available to consumers. Community banks, credit unions have a product now that we want to make sure we are protecting and giving latitude for, and other products that may arise around the country. We don't want to squash innovation in this area." 

CUNA has been working to educate the CFPB about the value of credit union small-dollar loan products, and problems that could be caused by adding regulatory hurdles to them. Specifically, we've advocated that adding additional requirements to NCUA’s Payday Alternative Loan (PAL) Program could stagnate credit union participation, since there are already many requirements for participants. We have also expressed concerns about similar state-chartered credit union consumer friendly payday alternatives. We have been highlighting that credit unions make little, or no, profit on these loans and as such, any roadblocks to participation, even if minimally burdensome, could simply drive credit unions out of this market and leave fewer options for consumers. This is particularly true in light of the increased regulatory burden from other rulemakings. 

Additionally, the NCUA just reported that payday alternative lending was up 7.2 percent in the last year. This seems like a step in the right direction for consumers seeking consumer friendly alternatives in this market, and shows increased interest in PAL participation. 

In light of Director Cordray’s remarks, we are hopeful that the CFPB has heeded our concerns and will not be including any additional regulatory burdens for credit union payday alternatives. 

During questioning, Director Cordray also provided an updated timeline about the forthcoming FDCPA rulemaking. He stated, “The notion that because we may issue the [debt collection] rule several years down the road, or maybe next year, we shouldn’t be engaging in UDAAP, I don’t think is a right approach.” 

This statement seems to indicate that the CFPB may continue creating policies for debt collection through their UDAAP enforcement authority, rather than through a formal rulemaking in the near future.  However, there has been some indications that the CFPB will hold a SBREFA panel for the FDCPA rulemaking in 2016.