WASHINGTON–The Small Business Administration’s Office of Advocacy has sent a comment letter to the CFPB saying the agency has underestimated the effect its proposed rule on small-dollar loans will have on credit unions.
CUNA had been meeting with the SBA prior to the comment letter being sent. The comment period on the CFPB proposal closed Friday.
The CFPB acknowledges in its proposal that depository institutions and credit unions with less than $10 billion in assets rarely originate loans that would be among those the proposal seeks to address. The CFPB has also asserted that small credit unions that make available Payday Alternative Loans (PAL) would continue to do so, using the PAL approach, but the CU trade groups and other analysts have said they believe PALs will be swept up in the proposal as currently written.
The SBA said in its comment letter that CUNA representatives who have attended the Advocacy’s roundtables reported that the minimum length of a PAL loan is 30 days. As such, some credit unions do make loans that are under 46 days. “Small credit unions are very concerned with the lack of sufficient analysis about the impact of this rule on credit union loans under 46 days,” the SBA wrote.
‘In addition, according to CUNA, the all-in APR is problematic for loans longer than 45 days,” the SBA letter goes on to say. “It may require credit unions to perform three different APR calculations for consumer loans, in addition to having new forms and disclosures, compliance training, and other resources. The proposed rule adds unnecessary complexity and new compliance burdens to consumer-friendly credit union small-dollar loans.”
In a statement in follow-up to the SBA comment letter, CUNA’s chief advocacy officer, Ryan Donovan, said, “We thank the SBA Office of Advocacy for taking the time to listen to credit unions' concerns and for reflecting them in their comment letter. We hope the concerns related to the impact on credit unions and their members expressed by both the SBA Office of Advocacy and NCUA will carry significant weight as the CFPB moves to finalize the rule.”