NCUA Board to Consider Proposed Payday Loan Rules

The NCUA board will consider whether to make changes to the rules governing its Payday Alternative Loan Program at its May 24 meeting.

The announcement is not a surprise since the board announced that it intended to make changes to the loan program when it recently released its Spring regulatory update.

The agency plans to propose rules “modifying the minimum and maximum amount of the loans, eliminating the minimum membership requirement, and increasing the maximum maturity for these loans,” according to its Spring regulatory agenda.

The board made it clear in its announcement that the new program would not replace the current PAL program but would supplement it. The board also announced at the time that the board will consider whether to create a third loan option, which would include different “fee structures, loan features, maturities, and loan amounts.”

Through its current PAL program, the NCUA permits federal credit unions to charge an interest rate of 1,000 basis points above the maximum interest rate established by the NCUA board and an application fee of not more than $20. However, few credit unions participate in the program because they do not consider it to be profitable.

The CFPB exempted loans modeled after the PAL program from its strict payday lending rules.  Still, few credit unions participated in the program, saying that it would not be profitable to do so.

Also, at next week’s meeting, the NCUA board will consider final rules governing involuntary liquidation and claims procedures.

Meanwhile, the time period for Congress to nullify the CFPB’s strict payday lending rules expired this week. Congress could have nullified the rules using the Congressional Review Act but would have had to do so within a specified time period.

Members of Congress had proposed resolutions voiding the rules, but neither House voted on them.

An advocate for strict payday lending rules said she was pleased that Congress did not take action to nullify the rules.

“The consumer bureau should now focus on enforcing this rule as written and defend it against the payday lenders, who are desperately trying to block the rule from moving forward,” said Senior Legislative Counsel Yana Miles, senior legislative counsel at the Center for Responsible Lending.

Still, the strict rules face additional challenges. They were issued by former CFPB Director Richard Cordray, a critic of the payday lending industry. When Acting Director Mick Mulvaney took office, he said the agency would be revisiting the rules.

Mulvaney critics linked his intention to revise the rules to his having accepted campaign contributions from the payday lending industry.

In addition, the Consumer Financial Services Association of America is challenging the rules and has filed suit in the U.S. District Court for the Western District of Texas.

The CFPB has not yet filed its response to the suit.