The CFPB released its new proposed rule on payday and small dollar loans at a field hearing in Kansas City, MO. In a nutshell, the CFPB proposal is complicated, as suggested by the 1,549-page document that aims to limit high-interest loans by predatory lenders.
LSCU has learned from NCUA sources that the rule contains two specific Payday Alternative Loans (PALs) exemptions: Ability to Repay and Payment Notification. It is helpful and beneficial to credit unions that they will not have to comply with those guidelines. However, it is also important to point out that there are significant other areas of the proposed rule that will require credit union compliance.
More will be known as the rules are further analyzed by both the League and CUNA. In an article in Credit Union Today, CUNA stated that it will develop its comments for the CFPB with its Consumer Protection Subcommittee, led by Bill Cheney, president/CEO of SchoolsFirst FCU, Santa Ana, CA, and its Advocacy Committee, led by Patrick Jury, president/CEO of the Iowa Credit Union League.
“We believe that any rulemaking in this area should encourage credit union participation in this market, not impede it. In response to CUNA’s advocacy efforts, the CFPB has indicated that it aims not to include credit union products in this proposed rule,” said CUNA President/CEO Jim Nussle.
CFPB Director Richard Cordray said the proposal also would not require the full-payment test for certain installment loans that pose less risk to consumers.
The proposal is now out for comment, through Sept. 14, and the LSCU and Affiliates encourages credit unions to take advantage of the opportunity to be heard. Read a fact sheet summarizing the proposed rule. Read the CFPB proposal.