Removing Barriers Blog

Ohio League Outlines Concerns about Impending Small-Dollar Loan Proposed Rule
Posted May 02, 2016 by CUNA Advocacy

Recently, Ohio Credit Union League representatives, Ohio credit unions, and CUNA staff met with Consumer Financial Protection Bureau (CFPB) staff to discuss short-term, small-dollar loans as they are offered to credit union members. This week the Ohio League sent a follow-up letter to the CFPB to reiterate the importance of these products to Ohio credit union members, and to ask the Bureau to exempt credit union products from future rulemakings, which should be instead aimed at predatory lenders in this market.

In the letter, Vice President, Government Affairs Patrick Harris for the Ohio League, noted that small-dollar loans are a vital part of the history of credit unions and their mission of “People Helping People,” especially for low-to-moderate income consumers. The letter further states, “While we appreciate the Bureau’s determination that NCUA’s PALs should be exempt from an anticipated small-dollar loan rule, we want to take a few moments to advise you of the great variety of small-dollar and emergency loans made by credit unions, many of which do not fit exactly into the PALs model and deserve equal exemption.”

The letter also specifically urges the CFPB to use its authority under Section 1022 of the Dodd-Frank Wall Street Reform and Consumer Protection Act to exempt credit unions from a regulation, which should be aimed at protecting consumers from usurious and unregulated payday lenders. It also discusses the high demand for short-term and small-dollar credit. It notes, “Four in 10 Americans experienced a financial shock or had a family member experience one in the past year. People often need a small-dollar loan to cover these emergency events.”

Additionally, in his letter Harris outlines the wide variety of programs credit unions in Ohio offer to their members to provide options for small-dollar credit. As illustrated in the letter, a one-size fits all rulemaking is not appropriate for these varied programs, which are tailored to individual credit union members’ needs.

Harris points out, “It is difficult to fit short-term, small-dollar lending solutions offered by credit unions into preconceived ‘buckets,’ underlining the need for underwriting criteria to stay at the credit union level. The Credit Union Movement is founded on the philosophy that members require and deserve individual attention to their unique financial situation.”

CUNA and the Ohio Credit Union League, together with our other league partners will continue to advocate on behalf of credit unions and their members to ensure that the CFPB rulemaking does not limit choice, or the ability to offer diverse products and services. A proposed rule is expected within the next month or two.