WASHINGTON–A closer look by CUNA at the CFPB’s broad, proposed new rulemaking over short-term, small-dollar loans finds some impact to loans made under NCUA’s Payday Alternative Loan (PAL) program.
Both NAFCU and CUNA last week expressed concerns that CUs will be caught up in inadvertent and unintended consequences of the 1,500-page proposal, despite the Bureau verbally stating there will be a carve-out for PAL loans.
CUNA’s early analysis of the rule’s treatment of PALs shows:
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PALs are nominally exempted, but CUNA’s early analysis indicates credit unions offering PALs or other similar loans may face additional burdens;
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The proposal appears to allow for a member to receive six PALs per year, after the CFPB initially suggested four per year. CUNA asked the Bureau to raise the number to six to match the amount allowed by the NCUA; and
- The proposal includes new requirements for the verification of income, and adds several other modifications to the PAL program including a change from a minimal loan of 30 days to 45 days, limitations on payment transfers, amortization requirements and debt collection requirements.
A few other early concerns CUNA has identified include:
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The proposed use of an all-in measure of the cost of credit, rather than the definition of annual percentage rate under Regulation Z for proposing a broader definition of “lender” than Regulation Z does in defining “creditor;”
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The proposal would define “closed-end” credit as extension of credit to a consumer that is not open-end credit under proposed § 1041.2(14) of the rule. CUNA said, “This definition is used in various parts of the rule, most notably where it would prescribe slightly different methods of calculating the total cost of credit of closed-end and open-end credit;”
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New disclosures and ACH requirements for non-exempt loans; and
- New reporting requirements for covered loans not meeting an exception to the ability-to-repay requirements.