WASHINGTON–CUNA said it supports a delay in the compliance deadline for the CFPB’s 2017 rule governing Payday, Vehicle Title, and Certain High-Cost Installment Loans, better known as the Payday Rule.
A pending proposal would extend the compliance deadline for the mandatory underwriting provisions by 15 months from August 19, 2019 to November 19, 2020.
In a letter to the agency signed by Alexander Monterrubio, senior director of advocacy and counsel, CUNA said the additional time would provide credit unions an opportunity to adequately prepare for the rule’s implementation, while also permitting the CFPB to continue to pursue a related rescission proposal.
CUNA told the agency it believes the proposed delay would provide credit unions an opportunity to adequately prepare for implementation.
“Given the Payday Rule’s broad scope and the pending challenge to the rule’s legality in federal court, the Bureau should delay the rule in its entirety rather than merely delaying the ability-to-repay (ATR) provisions that are the subject of the rescission proposal,” the letter reads. “A delay of the entire rule is especially warranted if the CFPB intends to amend other aspects of the rule, such as the payments provisions, in the near term.”
Broad Objectives
CUNA said it believes the CFPB’s approach to regulating payday lending should be consistent with several broad objectives:
- The rule should be tailored to focus on lenders who abuse consumers and entrap them in cycles of debt.
- The rule should not inhibit credit unions from continuing to offer consumer-friendly emergency credit products to members in need. A solution could include using the Bureau’s exemption authority as credit unions have clearly set themselves apart from the actors the CFPB intends to rein in with the rule.
- The pending rule should be revised in a manner that encourages more credit unions to enter the short-term, small dollar lending market, including:
- Creating an express, broader exemption for credit union products using the Bureau’s exemption authority
- Coordinating with the NCUA to ensure consistency with any changes to the Payday Alternative Loan (PAL) program, which currently benefits from an exemption under the current rule. The Bureau should seek to expand the PAL exemption should NCUA finalize its proposed PAL II program
Other Recommendations
CUNA said it also continues to urge the CFPB to further examine and revise the rule to avoid any negative effects on credit unions’ small-dollar loans programs while still holding accountable non-depository payday lenders, especially those with histories of bad behavior.
The CFPB issued a separate proposal on additional changes to the rule, an issue on which CUNA said it will submit a separate letter.