CUNA Advocacy Update October 3, 2016

Action Alert: CFPB’s Small Dollar Loan Proposal: The Consumer Financial Protection Bureau (CFPB) released an extremely complex 1,300+ page small dollar rule in early June. The proposed rule includes some reforms to predatory lending practices, which credit unions would support if narrowly tailored. Unfortunately, the CFPB’s proposed rule badly misses the mark of targeting predatory behavior, and instead threatens to limit consumer-friendly credit union alternative short-term, small dollar loans. We encourage you to share your story with the CFPB and tell them the negative impact this rule will have on your ability to provide services to your members. The comment period closes on this Friday.

Comment Letter Preview: In our comment letter, which we expect to file later this week, we will discuss the importance to consumers of having safe and affordable credit options from credit unions. We will clearly stake a position that a rulemaking intended to address abuses in the small dollar market should not cover credit unions, reiterating our call for the CFPB to exempt credit unions from the proposal. We also will squarely address the provisions of the proposal which will make it more difficult for consumers to access credit from credit unions. Further, we intend to make a legal argument that the CFPB has exceeded its statutory authority by applying this proposal to credit unions using its Unfair, Deceptive, and Abusive Actions and Practices authority, despite insufficient evidence to show credit unions engaged in the harm perpetrated by other actors that the rule intends to address.

Credit Union Comment Letters: Our grassroots push is for credit union employees to send the CFPB emails describing how they have helped credit union members with short-term, small dollar loans. However, we know that many credit unions will want to send a more substantive comment letter describing your concerns regarding the impact the proposal will have on your members’ ability to access credit. As you prepare your letter, please refer to our summary of the proposal. When discussing the proposal, please try to describe the impact it will have on your members. Reflecting on the impact on consumers will help drive home the point that there are consequences – both intended and unintended – from this proposal for consumers.

Here are some questions you might consider as you prepare your comment letter:

  • How will this rule impact your members’ ability to access consumer friendly short-term and small dollar loans from your credit union?
  • To what extent are the underwriting standards, and other requirements for “exempted” loans, in line with how credit unions are currently offering small dollar loans? Do you think the underwriting standards and requirements in the proposal are appropriate for the size and risk of these loans? What impact will these requirements have on your members’ ability to access credit? Are you aware of loans you would not have been able to make if you had to follow these standards? Are there elements of the proposed “full-payment” or ability to repay test that you believe are unnecessary for credit unions? Or, too onerous to comply with?
  • How will the new requirements proposed to be added to the NCUA PAL program impact credit availability to credit union members? Will these new compliance burdens impact your ability to offer small dollar loans that are currently in compliance with NCUA and state laws?
  • Do you believe you could offer a small dollar loan program that fits into the portfolio approach (less than 5 percent default rate) exemption?
  • Are you concerned with compliance burdens since all covered loans, even those qualifying for an “exemption”, would still be required to comply with the limitation on payment transfer attempts, the consumer rights notice, and the compliance program and record retention requirements? Are these more appropriate for nonbank lenders than credit unions?
  • Do you have concerns that an all-in APR calculation of a refinanced auto loan could sweep your loans into this rule if they are above or could potentially be above 36 percent, when including fees and other ancillary products in the “all-in” calculation? Do you think this could be problematic for consumers if it becomes harder to refinance auto loans at credit unions?
  • Do you think credit unions should be able to offer a short-term loan for less than 46 days to a member in need of it for an emergency or other financial difficulty, without having to comply with complex requirements outlined for loans of this timeframe in the proposal?
  • Are you concerned that the extreme complexity of this proposal will impede innovation in this market for credit unions?
  • What makes how you offer this type of lending different than nonbank providers?
  • Will 15 months be sufficient time to comply with the new rule?

Comment letters can be sent through PowerComment or emailed directly to the CFPB at: FederalRegisterComments@cfpb.gov. Be sure to reference the following in the subject line: CFPB Proposed Rule Payday, Vehicle Title, and other Covered Loans; Docket No. CFPB-2016-0025.

Pending Regulatory Comment Calls: CUNA intends to comment on the following pending regulatory proposals. For our comment letter to have the greatest impact, we need to hear from you. Please consider whether and how these proposals would affect your credit union, and contact the CUNA staff listed with each proposal with your feedback    We encourage Leagues and credit unions to use PowerComment to file comment letters with regulators. For more information regarding these proposals, please follow the links below:

Issue Comment Period Deadline Agency CUNA Staff Contact
Payday Loans October 7, 2016 CFPB Leah Dempsey
Single-Family Credit Risk Transfer October 13, 2016 FHFA Andy Price
Amendments to TRID under Reg Z October 18, 2016 CFPB Andy Price
CIP/AML & Beneficial Ownership Requirements for Banks Lacking a Functional Federal Regulator October 24, 2016 FinCEN Luke Martone
Amendments Relating to Disclosure of Records and Information October 24, 2016 CFPB Luke Martone
Request for Information: Payday Loans November 7, 2016 CFPB Leah Dempsey

Posted in Advocacy News, CUNA.