WASHINGTON—CUNA is cautioning the CFPB over “potential unintended consequences” over a proposal related to payday and vehicle title loans.
CUNA sent the letter in response to work done by the CFPB’s Small Business Advisory Review Panel. CUNA said it supports the CFPB’s goal of curtailing consumer abuse and providing stronger consumer protections surrounding the short-term and payday lending industries, but proposed rules could affect credit unions that have worked to create alternatives to such loans.
CUNA said many of the protections the CFPB is seeking were already included in a 2010 NCUA rule that allowed for payday-alternative loans, or PALs, which included numerous conditions to ensure borrowers don’t become trapped in a cycle of such loans.
“Asking these participating credit unions to take on any additional burdens could interfere with their already restricted ability to compete in this market,” CUNA said in its letter.
“In the proposals, the CFPB…predicts the suggestions put forth will cause a substantial change to this market, including a large reduction in the volume of loans and in turn the number of small businesses,” CUNA noted. “The CFPB states that the proposals under consideration could lead to substantial consolidation in the short-term payday and vehicle title lending markets, and that it is conducting further analysis of the potential for consolidation in these markets and evaluating the impact of state laws that have restricted payday or vehicle title lending on the lenders operating in those states. CUNA encourages the CFPB during this further study to consider how credit unions may play a role in this market change, and how best to not inhibit credit unions from participating and continuing to effectively serve their members.”