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November 16, 2018

FDIC seeks input on small-dollar loans; NAFCU reiterates need for PALs flexibility

moneyThe FDIC is seeking comments on how banks can better serve consumers who need small-dollar loans. NAFCU has long advocated for additional mechanisms to allow credit unions to provide more small-dollar loans to members in need.

The request for information (RFI) solicits comments on the consumer demand for small-dollar loan products, the supply of small-dollar offerings currently offered by banks and what the FDIC can do to spur banks to offer these products. The Office of the Comptroller of Currency has also encouraged banks to offer more short-term, small-dollar loans.

In May, the NCUA issued a proposed rulemaking to provide federal credit unions with an additional option under its payday alternative loans (PALs) program. PALs II would not replace the current PALs rule, but would be an alternative option that features higher loan amounts, longer loan terms and less strict membership requirements. The NCUA also left open the option for PALs III, which could include different fee structures, loan features, maturities and loan amounts. NAFCU recommended the NCUA allow even more flexible parameters than what is currently proposed.

NAFCU also hosted a small-dollar lending working group to explore additional small dollar lending options for credit unions.

Bureau of Consumer Financial Protection (previously the CFPB) Acting Director Mick Mulvaney has stated that the bureau will revisit its payday lending rule. The bureau's anticipated rulemaking would propose changes to the ability to repay provision, as well as the compliance date.

While the final payday rule addressed many concerns raised by NAFCU to ensure credit unions' ability to meet consumers' needs for short-term, small-dollar loans, the association has asked the bureau to expand the rule's safe harbor so that credit unions will be more likely to adopt the PALs program.

NAFCU last month reiterated this recommendation during a conversation with bureau staff.