ARLINGTON, Va.—With payments system Square now offering installment payments on purchases of $250 to $10,000 through its lending arm, Square Capital, NAFCU is repeating its call for a level playing field that holds all those operating in the lending space to the same standards financial institutions follow.
Square Capital has been testing this initiative over the past year. Square's Industrial Loan Corporation (ILC) charter has not yet been approved; these loans are issued by Celtic Bank, a Utah-Chartered Industrial Bank. The company will cover the product cost on the buyer's behalf and approved customers will pay Square back in fixed monthly amounts over a pre-set amount of time.
“There has been a push by federal regulators for more offerings of small-dollar loans to consumers. NAFCU has long advocated for additional mechanisms to allow credit unions to provide more small-dollar loans to members in need,” NAFCU said.
NCUA’s Proposal
The NCUA in May issued a proposed rulemaking to provide federal credit unions with an additional option under its payday alternative loans (PALs) program. PALs II would not replace the current PALs rule, but would be an alternative option that features higher loan amounts, longer loan terms and less strict membership requirements. The NCUA also left open the option for PALs III, which could include different fee structures, loan features, maturities and loan amounts.
NAFCU recommended the NCUA allow even more flexible parameters than what is currently proposed.
The Office of the Comptroller of the Currency (OCC) also issued guidance to encourage banks to offer short-term, small-dollar loans.