Trade, regulator advocacy protects CUs' alternative loans from CFPB rule
Thursday, February 15, 2018
Attentive, active work by credit unions' national associations and regulator has thus far protected certain alternative, short-term loans from broader implications of the Consumer Financial Protection Bureau (CFPB) Payday Lending Rule, which the CFPB even now plans to reconsider. Should it remain as written, compliance with most provisions will be required by August 19, 2019.
In a January 16 release, the CFPB expressed its intent for rulemaking to reconsider the original final rule released October 5. That version--the product of more than two years of work by the bureau--specifies that credit union loans matching the National Credit Union Administration (NCUA) definition of Payday Alternative Loan (PAL) are exempt from the rule's more extensive requirements of non-traditional products, most offered by historically unregulated lenders. Thus, a credit union that offers short-term, small-dollar loans must either have those fit PAL criteria or work toward compliance with rule provisions for non-exempt loans.
The current rule reflects direct exchange among the highest levels to demonstrate credit union programs as unique and borrower-minded. Even so, the League, CUNA, and NAFCU remain focused on CFPB actions and opportunities to further shape the rule and reduce its potential impact on credit unions.
"We have watched the CFPB's process closely, because we know credit unions in the Carolinas have unique programs to help their members through difficult times," notes League VP Regulatory/Compliance Counsel Jeanne Couchois. "We also have been pleased at how quickly CUNA, the NCUA, and others engaged in the process. Their action proves how widespread credit union alternatives are, and how important it is that we continue to defend against further unintended consequences of broad-brush regulation."
For detail and further background, see the full CFPB Payday Lending Rule, the June 2017 NCUA letter to the CFPB, and related posts in the NAFCU Compliance Blog.