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Before the House Financial Services subcommittee held its
hearing on short-term, small-dollar lending, we submitted a letter highlighting
credit union concerns with a “broadsword approach” being taken by the CFPB. The hearing focused on the CFPB’s proposed
plan to regulate short-term, small-dollar loans and the effects it could have
on the marketplace.
Our letter stated that instead of concentrating on bad
actors in the marketplace, the CFPB seems intent on taking a broadsword
approach to its forthcoming rulemaking for payday and small-dollar loans, which
will include sweeping in credit union products. We fear that products
specifically tailored to meet the needs of members could be swept into this
rulemaking, and yet another compliance burden will be placed on a service
credit unions are offering their members as an accommodation.
The bureau’s overly broad approach to this rulemaking could
have a tragic consequence: the very consumers it seeks to protect may be harmed
because consumer friendly alternatives offered by credit unions will become
more difficult to provide, and less widely available. This will lead to fewer
choices and worse options.
Additionally, NCUA already has a Payday Alternative Loan
(PAL) program in place. Credit unions offering PALs through this program must
cap the interest rate at no higher than 28%, including application fees, and
must meet an extensive set of other conditions.
Rather than taking steps to allow more credit unions to
offer these safer loans, the CFPB’s outline of proposals for the payday,
small-dollar loan rulemaking would actually be a step backwards. The proposals
suggest sweeping credit union products into the CFPB rulemaking, and adding
even more conditions to the PAL program.
It would be difficult for credit
unions already struggling with an unprecedented number of compliance burdens
over the past few years to voluntarily take on additional regulatory hurdles in
this area, particularly since short-term, small-dollar loans are already offered at breakeven cost, or a loss to the
The Bureau needs to take into consideration the impact its
rules will have on consumers and--as the law provides – exempt credit unions
from rules designed to reign in the abusers of consumers. When safe options are
eliminated from the financial services marketplace there is no question that
consumers lose. For the sake of credit union members and all consumers, we hope
that the CFPB will more seriously consider our concerns before it releases its
proposed rule for small-dollar and payday loans.
Champion for the Credit Union Movement
Credit Union National Association is the most influential financial services trade association and the only national association that advocates on behalf of all of America's credit unions. We work tirelessly to protect your best interests in Washington and all 50 states. We fuel your professional growth at every level and champion the credit union story at every turn.
© 2017 Credit Union National Association
ADA Compliance Notice & Legal
© 2017 Credit Union National Association |
ADA Compliance Notice & Legal