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In a letter ahead of a House subcommittee hearing today examining CFPB and short-term, small-dollar lending, NAFCU Vice President of Legislative Affairs Brad Thaler urged lawmakers to press CFPB to use its Dodd-Frank Act authority to exempt credit unions from its rulemakings, including an upcoming payday loan rule.

In his letter to the leaders of the House Financial Subcommittee on Financial Institutions and Consumer Credit, Thaler raised concerns that payday lending rulemaking could prevent responsible payday alternative loans (PALs) from credit unions.

"We have urged the CFPB to carefully craft any future rulemaking to ensure credit unions are not forced to withdraw from providing a viable alternative to predatory lenders," Thaler wrote in the letter to Subcommittee Chairman Randy Neugebauer, R-Texas, and Ranking Member Lacy Clay, D-Mo. "Additionally, NAFCU recommended that any future payday rulemaking promulgated by the CFPB include an express exemption for federal credit unions and other insured depository institutions conducting short-term, small-amount loans in accordance with current state or federal laws."

In related news, CFPB Director Richard Cordray, as quoted in The Wall Street Journal, said banks and credit unions should offer more small-dollar loans as a substitute for payday lending.

NAFCU has repeatedly raised concerns about potential unintended consequences resulting from future CFPB rulemaking on payday lending. NAFCU believes the planned rulemaking could affect credit unions' ability to make PAL loans under NCUA's small-amount, short-term lending rule.

PALs are structured to protect members from high-cost, predatory payday loans, but NAFCU has emphasized that further restriction of PAL loans would push credit unions out of the market – hurting consumers.