WASHINGTON—NCUA’s Payday Alternative Loans (PALs) should be exempt from the CFPB’s proposed rule for short-term, small-dollar loans, according to comments from the Bureau.
As the CFPB prepares to release its new small-dollar loan proposal, CFPB Deputy Director David Silberman agreed during questioning last week that PALs should be exempt from the proposal. Silberman spoke during a hearing in front of the House Financial Services Subcommittee on Financial Institutions and Consumer Credit.
“I would like to thank the CFPB for agreeing that the National Credit Union Administration’s PAL program should not be preempted in the forthcoming rulemaking for small dollar and payday loans during an exchange at today’s hearing with Rep. Denny Heck (D-WA),” said CUNA President and CEO Jim Nussle. “We also appreciated the CFPB clarifying that it does not intend to disrupt the kind of thoughtful lending that credit unions do in response to a question from Rep. Keith Rothfus (R-PA.).
“We understand this to mean that the CFPB does not plan to sweep consumer-friendly credit union small-dollar loans offered by both federal and state-chartered credit unions into its rule, which would ensure that credit unions’ ability to provide safe and affordable alternatives is not inhibited,” Nussle added.
In explaining to Silberman how CUs and community banks fight predatory loans, Heck asked if the CFPB would be coordinating with regulators on their approaches.
“The National Credit Union Administration has adopted provisions for what they call Payday Alternative Loans to enable credit unions to make a product they think works. The evidence is a significant number of credit unions are taking advantage of that,” Silberman said. “In the outline of the proposals under considerations, we indicated we would allow that to continue as essentially an exception to the general rule.”
CUNA reported that Heck then asked if the potential proposals would not preempt the PAL approach, and Silberman responded with, “Correct.”