ARLINGTON, Va.—NAFCU has sent the CFPB an outline of provisions in the Bureau’s payday lending proposal that it said encroach upon the authority of the NCUA and asked that the Bureau use its Dodd-Frank Act authority to exempt credit unions from the rule.
In the trade association’s comment letter on the payday proposal, NAFCU President and CEO Dan Berger noted that while the trade association and its members appreciate the CFPB’s decision to identify credit unions as model lenders, especially regarding the payday alternative loan (PAL) exemption, “we are deeply concerned with the Bureau’s sweeping and complex new requirements.”
Berger pointed to other products credit unions offer, such as signature loans, and wrote that these products may need to undergo new verification and ability-to-repay requirements that could be potentially embarrassing to some consumers and render products less accessible to others.
“Credit unions have built a stellar reputation as trustworthy and accessible places for obtaining responsible lending products of all types, which allow the member to address their immediate financial needs in a fair and responsible manner,” Berger wrote. “However, the proposed rule would defeat these efforts by erecting time-consuming and costly barriers for consumers who want timely relief from financial distress.”
Berger asked that the CFPB use its authority under Section 1022 of Dodd-Frank to provide an exemption for credit unions from this rule. He said Congress has also supported this move by citing a letter sent to CFPB Director Richard Cordray by 329 House members and another from 70 senators urging him to use the law’s exemption authority for credit unions. He further noted there is no evidentiary support for including credit unions in this rulemaking.
Berger also addressed several other points that he said should be viewed in lieu of an exemption for credit unions. Among his suggestions:
- The Bureau should not promulgate a final rule under its unfair, deceptive, or abusive acts or practices authority when it lacks a reasonable basis to conclude that credit union loan programs are problematic.
- Changes to the PAL program will disrupt a well-established, model lending standard.
- The Bureau should respect the NCUA’s authority and expertise by not attempting to create a parallel set of regulations for the PAL program.
- The Bureau’s definition of a covered, longer-term loan encompasses many products that have never been traditionally considered payday loans.
- Information collection requirements would substantially raise compliance costs.
- Credit unions need a safe harbor to offset compliance costs.
“NAFCU and our members believe that exempting credit unions from rulemakings intended for unscrupulous actors would result in significant, immediate regulatory relief that would allow credit unions to better serve their members,” Berger concluded. “The relationship between the credit union and its member is based on fairness and responsible practices. Therefore, subjecting credit unions to rules aimed at bad actors only results in encumbering their ability to serve their members.”