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Your Comments Needed Now on Short-Term, Small-Dollar Rule
Monday, September 12, 2016 6:50 AM

As you know, the Consumer Financial Protection Bureau's new comment deadline for its payday and small-dollar loan proposal is Oct. 7. Comments from credit union stakeholders can now be sent to Credit Union National Association through Sept. 19, so we are stepping up our call to action on this important proposal.

The proposed rule includes some reforms to predatory lending practices, which credit unions would support if narrowly tailored. Unfortunately, the rule does not narrowly target those abusing consumers and instead also sweeps in consumer-friendly credit union loans.

While it purports to exempt the National Credit Unions Administration's Payday Alternative Loan (PAL) program, in actuality it adds new regulatory and compliance burdens to the PAL program, as well as other small dollar loan programs offered by state-chartered credit unions. The added compliance burdens associated with the covered loans, as well as the exemption options for these loans, eliminate flexibility and have caused some credit unions to have concerns about the ability to continue offering these consumer-friendly loans, while also protecting the resources of their membership.

Additionally, the overly broad scope of the proposed rule sweeps in products and services offered by financial institutions that are not even similar to a payday or small dollar loan, including auto refinance loans if they exceed an all-in annual percentage rate (APR) of 36 percent when other products are included with the loan. The CFPB has proposed these changes without supporting its actions with research or data about any harm caused by credit union small dollar lending, which arguably does not exist since credit unions often serve as a consumer friendly alternative to predatory lenders.

What We Need From You 
We realize this is a complex issue, but the CFPB's proposed rule badly misses the mark of only targeting predatory behavior, and instead threatens to limit consumer-friendly alternatives to short-term, small dollar loans. We want the CFPB to understand how credit unions are serving real people, who encounter very real financial difficulties.

Please go to the Voter Voice Grassroots Action Center, where you can draft a response or use a populated letter.

More information on the proposal can be found in CUNA’s detailed analysis of the proposal, and through a recording of CUNA’s webinar on the rule, free for members. 

If you need help crafting your own letter or if you have questions about this proposal, please contact Cornerstone Credit Union League SVP Regulatory Compliance Suzanne Yashewski at 512-853-8516 or at syashewski@cornerstoneleague.coop.