NCUA Requests CFPB Exempt PALs from Payday Lending Rule

National Credit Union Administration (NCUA) Board Chairman Rick Metsger wrote the Consumer Financial Protection Bureau (Bureau) to exempt payday alternative loan (PALs) made by federal credit unions (FCUs) from the Bureau's final payday lending rule.

“We respectfully request the Bureau exempt FCUs completely from its final rule for loans made under and consistent with NCUA’s PALs regulation,” Metsger said in his letter. “As the prudential regulator for federal credit unions, NCUA already ensures that members receive the type of protections the Bureau is seeking to address. The Bureau should therefore defer to determinations of the FCU prudential regulator about this product."

In addition, NCUA recommended that the Bureau provide a small creditor exemption for credit unions making fewer than a threshold number of covered transactions during the preceding year. NCUA contends that without a small creditor exemption, small credit unions may be kept from extending short term, small dollar loans to their members due the increased compliance burdens.

Also, NCUA requested that Bureau clarifies in its "final rule that it does not intend to narrow or otherwise alter the circumstances in which a credit union can use a Congressionally-authorized statutory lien."

Furthermore, "the Bureau proposes a second exemption from the ability-to-repay (ATR) requirements for longer-term loans. The availability of the second exemption depends partially on whether a creditor has a default rate of not more than five percent in the creditor’s portfolio of similar loans. NCUA recommends the Bureau consider a slightly higher default rate."

Read the letter.