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Chairman Says NCUA Regulations Provide Necessary Consumer Protection

ALEXANDRIA, Va. (Oct. 5, 2016) – National Credit Union Administration Board Chairman Rick Metsger says NCUA’s payday alternative loan rules protect consumers, and he has asked the Consumer Financial Protection Bureau to fully exempt these loans from its final payday lending rule.

In a letter to CFPB (opens new window), Metsger said payday alternative loans offered by federal credit unions are “a safe, more affordable product” than typical payday loans, which can saddle consumers with unmanageable debt.

“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.

“The National Credit Union Administration fully supports the goals of the proposed rule,” Metsger said. “NCUA continues to review its existing regulations and may consider enhancements to the PALs regulation. Additional rules from sister agencies will unnecessarily increase compliance burdens.”

Metsger said CFPB has acknowledged it “has not observed evidence that lenders making loans under the NCUA program participate in widespread questionable payment practices.”

NCUA in 2010 approved a payday alternative loan rule (opens new window) that included, among other conditions:

• Loans may be for $200 to $1,000 to borrowers who have been credit union members for at least one month;
• Terms of one to six months;
• A maximum $20 application fee;
• No rollovers are allowed; and
• An interest rate of up to 28 percent APR if all other conditions are met.

The Consumer Financial Protection Bureau in June issued its proposed rule (opens new window) to regulate loans with terms of less than 45 days and those with terms longer than 45 days that have annual percentage interest rates greater than 36 percent and are either paid from a consumer’s account or income or are secured by the consumer’s vehicle. The proposed rule also covers some longer-term loans at less than 36 percent interest and includes only a conditional exemption for loans under NCUA’s PALs regulation. Comments on the proposed rule are due by Oct. 7.