September 20, 2012

ANPR out on payday alternative loans

An advance notice of proposed rulemaking from NCUA seeks comments on whether the agency should revise the limitations on short-term, small-amount loans offered by federal credit unions as an alternative to payday loans.

NCUA approved a rule in 2010 that permits federal credit unions to charge a rate no higher than 1,000 basis points above the agency-set loan interest rate, now 18 percent. The rule permits an application fee of up to $20, requires that loan amounts are no lower than $200 an no higher than $1,000 and, among other things, prohibits more than three such loans to one member in any rolling, six-month period.

In issuing the ANPR, NCUA cites limited response from federal credit unions to this program. As of last Sept. 30, just 372 federal credit unions reported offering these loans; that rose to just 420 by this June 30.

The agency is taking comments for 60 days. NAFCU is preparing a Regulatory Alert for members.