WASHINGTON–Five federal agencies, including NCUA, have issued a joint statement urging credit unions, banks and savings associations to offer “responsible” small-dollar loans to consumers and small businesses affected by the coronavirus.
In the statement, NCUA, the Federal Reserve, the CFPB, the FDIC and the Office of the Comptroller of the Currency said they recognize responsible small-dollar loans can play an important role in meeting customers' credit needs because of temporary cash-flow imbalances, unexpected expenses, or income disruptions during periods of economic stress or disaster recoveries.
“Such loans can be offered through a variety of structures including open-end lines of credit, closed-end installment loans, or appropriately structured single payment loans,” the joint statement reads. “The agencies state that loans should be offered in a manner that provides fair treatment of consumers, complies with applicable laws and regulations, and is consistent with safe and sound practices.”
The statement further urges borrowers who experience unexpected circumstances and cannot repay a loan as structured to be aware credit unions, banks and savings associations have been further encouraged to consider workout strategies designed to help borrowers to repay the principal of the loan while mitigating the need to re-borrow.
Earlier Statement
As CUToday.info reported earlier, the agencies issued a statement they will favorably consider retail banking and lending activities that meet the needs of affected low- and moderate-income individuals, small businesses, and small farms for Community Reinvestment Act purposes, that are consistent with safe and sound banking practices and applicable laws, including consumer protection laws.
In addition to their latest statement, the agencies said they are working on future guidance and lending principles for responsible small-dollar loans to facilitate the ability of banks, credit unions, and saving associations to more effectively meet the ongoing credit needs of their customers, members, and communities.
CUNA Response
In response to the announcement, CUNA CEO Jim Nussle said in a statement, "Emergencies like the COVID-19 pandemic are when credit unions' not-for-profit model is on full display. We have a strong history of stepping up for our members in times of emergency, providing low- and no-interest short term, small dollar loans to help folks weather such uncertain times. All across the country, credit unions are working with members to provide new alternatives to abusive payday lenders and support their communities.”
CUNA said examples of the kinds of alternatives credit unions provide can be found here.