The CFPB's proposed payday lending rule, to be revealed Thursday, will have a carve-out for loans issued under the NCUA's payday alternative loan program, NAFCU President/CEO Dan Berger said Wednesday in a release. Berger discussed the issue with bureau Director Richard Cordray.
Credit union officials have expressed concern that as part of its attempt to rein in predatory lending, the CFPB might also place restrictions on loan products they offer as alternatives to payday loans. They had sought an exemption from the rules, saying credit unions offered an acceptable alternative.
“We appreciate Director Cordray reaching out to credit unions on this proposal,” Berger said. “This is a very good sign, but the proposal will likely be much broader, and we look forward to reviewing it and providing additional comments.”
The CFPB is expected to release the rules during a field hearing on the issue in Kansas City, Mo. The hearing is scheduled for 11 a.m. Eastern time and will be webcast on the bureau's website.
The proposed rules will cover such areas as the failure by lenders to determine whether consumers have the ability to repay without defaulting or taking out an additional loan, the CFPB said. In addition, the proposed rules will cover certain payment collection practices.
More than 100 million payday loans are issued each year, and often carry annual percentage rates of 300% to 500%, according to Nick Bourke, director of the Small Dollars Loan Project at the Pew Charitable Trusts.
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