NAFCU Statement on CFPB's Proposal on Payday Lending


Washington (June 2, 2016) -- National Association of Federal Credit Unions (NAFCU) President and CEO Dan Berger issued the following statement in response to the Consumer Financial Protection Bureau's (CFPB) 1,300 page proposal on payday lending.CFPB is holding a hearingon small-dollar loans in Kansas City, Mo. at 11 a.m. Eastern today.

"While we are grateful for the recognition of the National Credit Union Administration's payday alternative loans (PALs) program, we remain extremely concerned about the proposal's effect on credit unions' ability to exercise statutory liens as defined by the Federal Credit Union Act," said Berger. "It is a good first step, but we believe the bureau can do more. NAFCU is reviewing the full proposed rule to assess its comprehensive impact on all aspects of credit union lending. We look forward to providing additional comments and continuing to work with the bureau on this critical issue."

The bureau proposes to prescribe a "full-payment test" to loans covered by the payday lending proposal. Generally, the proposed rule 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 PAL loan authorized by NCUA. This option would be available to all lenders on the same basis and not just to federal credit unions.

NCUA, through its PAL program, authorizes credit unions to provide short-term, small amount loans for which interest rates are capped at 28 percent and application fees do not exceed $20. There may be no more than three PAL loans to the member over a rolling six-month period.

Comments on the proposal must be received on or before September 14, 2016. In addition to the proposed rule, the CFPB has also issued arequest for informationon loans falling outside the proposal's scope and related practices; input is due Oct. 14.

NAFCU has been pressing CFPB to use its Dodd-Frank Act exemption authority more effectively to provide credit unions regulatory relief. We have 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.

The bureau's long-awaited payday lending proposal has been the subject of numerous, lengthy discussions among NAFCU and CFPB officials and staff. Berger, NAFCU Executive Vice President of Government Affairs and General Counsel Carrie Hunt and Director of Regulatory Affairs Alexander Monterrubio met with Cordrayin April to discuss the anticipated payday rule as well as the bureau's exemption authority under the Dodd-Frank Act.

Prior to Dodd-Frank's enactment, NAFCU was the only financial services trade association to oppose CFPB regulatory authority over credit unions.

The National Association of Federal Credit Unions is the only national trade association focusing exclusively on federal issues affecting the nation's federally insured credit unions. NAFCU membership is direct and provides credit unions with the best in federal advocacy, education and compliance


Patty Briotta
Director of Public Relations