Editor's note: The following letter to the editor was originally posted as a comment to our March 26, 2015 CU Times news story, "CFPB Looks to NCUA for Payday Loan Guidelines."
In the CFPB's payday loan press release, and in CFPB Director Richard Cordray's remarks at the field hearing on the topic in Richmond, Va. on March 26, the NCUA's short-term small dollar loans (STS) program has been given the self-described "consumer watchdog" agency's "housekeeping seal of approval." However, that is of limited value to the marketplace, where more than 19 million consumers per year take out traditional payday loans.
At the close of 2014, only 755 federal credit unions participated in NCUA's program and lessthan $38 million in STS loans were outstanding. That's out of a total of $712 billion in federally-insured credit union loans that were outstanding at year-end 2014. The STS comprised about 0.005% of the total. It is unlikely that credit unions will be able to pick up the slack once the CFPB "outlaws" most payday loans.
CUNA CEO Jim Nussle can count on the CFPB's misguided proposal to fail to "appropriately protect consumers" while concurrently make it impossible for credit unions to provide any appropriate alternatives. And Carrie Hunt, senior vice president of corporate affairs and general counsel for NAFCU, is wise to worry about "unintended consequences," as she noted in a prepared statement in response to the proposal, since "unintended consequences" is the CFPB's middle name. I think the CFPB's activist-driven "intended consequences" will make it impossible for any service provider to operate in the payday lending space.
Marvin Umholtz
Consultant
Olympia, Wash.
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