Newsroom

September 22, 2016

SBA roundtable eyes CFPB payday proposal

A Small Business Administration Office of Advocacy roundtable yesterday focused on the potential economic impact that CFPB's payday lending proposal may have on small entities. NAFCU Regulatory Affairs Counsel Andrew Morris attended the meeting.

During the roundtable, it was noted that 50,000 small entities may be impacted by CFPB's proposed rule. Discussion focused on the cost of the proposal on small entities and what feasible alternatives might be available that would achieve the regulatory objectives in a less costly way.

Several participants remarked that it will be costly to report and pull data from registered information systems, particularly as credit reporting agencies struggle to integrate new software capabilities. One participant expressed concern that by limiting access to credit, the CFPB's rules would pressure consumers to turn to unlicensed payday lenders for emergency loans.

The bureau's 1,300-page payday lending proposal includes a NAFCU-sought carve-out for loans issued under NCUA's payday alternative loan (PAL) program, but the association still has concerns about the proposal. One concern is the proposal's potential effect on credit unions' ability to exercise statutory liens as defined by the Federal Credit Union Act.

The bureau's proposed payday rule would prescribe a "full-payment test" to covered loans. Generally, it would require that a lender determine the consumer will be able to repay a loan up front without having to reborrow. This would not apply, however, to loans that generally meet the parameters of the PALs program. This carve-out would apply for all lenders, not just credit unions.

NAFCU continues to press CFPB to use its Dodd-Frank Act exemption authority more effectively to provide credit unions regulatory relief. It has also urged CFPB to include an express exemption for credit unions conducting short-term, small-amount loans in accordance with current state or federal laws, such as the PAL program; and an across-the-board, de-minimis exemption for credit unions that do not substantially engage in payday lending activities.

NAFCU was the only financial services trade association to oppose subjecting credit unions to CFPB authority under Dodd-Frank.

Credit unions can comment on CFPB's proposal through NAFCU's Regulatory Alert; comments are due to NAFCU today. Comments on the proposal are due to CFPB by Oct. 7.