CHICAGO—NCUA Chairman Rick Metsger believes the upcoming CFPB payday lending rule represents a critical juncture for CUs’ small-dollar loan products.
Metsger told CUToday.info that the Bureau’s approach to the product may represent a turning point for credit unions that offer a payday loan alternative. In a letter to the CFPB this week, Metsger called on the Bureau to fully exempt CU payday alternative loans from its final payday lending rule, citing the fact that NCUA’s payday alternative loan rules already protect consumers.
Metsger told CUToday.info during the NASCUS 2016 State System Summit here that should the CFPB payday rules pile on additional regulatory burden for CUs, many may just exit offering a product that delivers only marginal profitability and is typically offered only as a service.
“As the prudential regulator for credit unions, we have determined that we have been able to handle this product for members and credit unions just fine, and we need to do everything we can to encourage the CFPB not to layer on bureaucracy that would have CUs exit this space,” Metsger said.
Will the CFPB listen to credit unions this time? Over the past five years of the agency’s existence NCUA, credit unions and their trade groups have all weighed in on various issues and asked that credit unions be given a carve-out or an exemption from certain rules they say shouldn’t apply to them. But the CU track record with the CFPB has been spotty.
“It’s hard for me to weigh the odds, but I think the track record of credit unions with this product and our governance of CUs in this area has been very clear, and the CFPB has recognized that (payday lending) is not an issue (among credit unions),” and that NCUA tracks this product very carefully, said Metsger.
Metsger added that the CFPB is “extremely important in the things that they do, especially regarding larger institutions that are not in our per view. But we need to be in a position of ensuring that the people who use short-term small-dollar loans have a safe alternative from credit unions rather than going to someone who is out of the regulatory scheme.”
Metsger reiterated that credit unions have demonstrated that their payday alternatives are safe and reliable, and get consumers into the banking system and out from the shadow banking world.
“We need to do more to encourage these types of products and not make it so complicated that credit unions—for a product that offers marginal to flat income and sometimes loses money—want to stop offering this loan,” Metsger said.