NWCUA Submits Comments on NCUA Expansion of Payday Lending Alternatives

The Association urges NCUA to take the expansion even further to give credit unions more payday loan options.

8/7/18

The NCUA logoNorthwest Credit UnionAssociation has weighed in on the National Credit Union Administration’s (NCUA) goal to expand payday lending alternatives for credit unions and their members.

In May, NCUA proposed the expansion, which would allow credit unions to have more options for short-term, small-dollar borrowing. The proposed rule creates a new product option in addition to the current payday loan alternative, which has been available to federally chartered credit unions since 2010.

The loan option includes four changes:

  • It sets the maximum loan amount to $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 a time 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 Association is generally supportive of the payday lending alternatives proposal,” said Katie Clark, Director, Regulatory Compliance and Risk Management with the Northwest Credit Union Association.

“We discussed the proposed rule with several of our member credit unions and through those discussions, we identified a few areas where we could advocate for even greater regulatory flexibility for credit unions.”

In a letter to the NCUA, the Association agrees that payday alternative loans should have restrictions on applicable rollovers, fully amortize, and not occur concurrently.

“However, we feel that the proposal could go even further in providing a favorable operating environment for credit unions that wish to expand their payday alternative loan program,” the letter states.

The letter goes on to discuss APR restrictions, loan amount limits, and loan terms.

“If federal credit unions wish to serve their members’ needs and remain competitive, they must be able to make loans commensurate with other lenders in the market. We recommend raising the loan amount limit to $4,000.”

During the fourth quarter of 2017, 503 federal credit unions reported making payday alternative loans under the NCUA’s current rules. At the end of the fourth quarter of 2017, federal credit unions held $38.6 million in payday alternative loans on their books.