NCUA Looking into Additional Options for Payday Alternative Loans

Federal credit union members could have more options for short-term, small-dollar borrowing under a rule proposed by the National Credit Union Administration Board.

6/12/18

picture of national credit union administration officeThe proposed rule would create one new product in addition to the current payday loan alternative that has been available to federally chartered credit unions since 2010. The Board also is requesting that credit union stakeholders provide comments on a possible third option.

The new payday alternative loan the NCUA is proposing has features to help federal credit unions meet specific needs of certain payday loan borrowers that are not met by the current program and provide those borrowers with a safer, less expensive alternative to traditional payday loans.

The proposed loan option includes most of the features of current payday alternative loan program, with four changes:

  • Sets the maximum loan amount at $2,000 and eliminates the minimum loan amount
  • Sets the maximum term of the loan at 12 months
  • Does not require a minimum length of credit union membership
  • Does not include time a restriction on the number of loans a federal credit union may make to the borrower in a six-month period, provided the borrower has only one outstanding loan at a time

The NCUA is requesting public comment on a third option including areas of interest rates, maximum loan amounts, loan terms, and application fees.

Question of the Week

Does federal law require a credit union to provide an overdraft notice whenever an NSF item is presented?

No. Truth in Savings does not require that a credit union give a member an overdraft notice when an NSF item occurs. However, credit unions are now required to include notice on the member’s statement advising of any overdraft fees or returned item fees.  Credit unions do generally send a notice as a matter of industry practice and member courtesy. This notice is also helpful as a loss control measure since it raises a red flag for errors or unauthorized items.

While there is not a regulatory requirement to send the notice, the Joint Guidance on Overdraft Protection Programs suggests a best practice is to promptly notify the member each time the overdraft protection item is used.

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Questions? Contact the Compliance Hotline: 1.800.546.4465, compliance@nwcua.org.