Two credit unions cited in a letter to the NCUA this week complaining about payday lending emphasized that they merely participate in a CUSO offering the loans and do not offer them themselves.
In addition, the credit unions argue the loans offered through the CUSO XtraCash are the best way they have of helping members avoid other short term loans with even worse terms.
Meanwhile, the NCUA said it would be looking into the issues raised in a letter it received Thursday from the National Consumer Law Center and Center for Responsible Lending.
“We offer the XtraCash product to our membership as an alternative to the payday lenders,” wrote John Neusaenger, CEO of the 22,000-member, $181 million Orlando FCU in an email statement about the lending.
“Those loans are not written nor funded by the credit union, nor is the significant risk of loss taken on by the credit union,” Neusaenger said.
Charlton Knowles, CEO of the 8,900-member, $75 million Buckeye Community FCU in Perry, Fla., made similar points.
Communicating through the credit union's vice president, Pam Rigoni-Parker, Knowles said the credit union does not fund the loans, does not control their interest and does not make income from their interest.
“Buckeye Community FCU does not fund these loans. They are not loans of the credit union,” Rigoni-Parker wrote on behalf of Knowles, who was in CPA training on Friday.
“BCFCU does not receive any interest from these loans, so saying we are charging high interest rates is incorrect. Again - we collect no interest from these loans,” Rigoni-Parker wrote.
The credit union collects a small administrative fee for the loans and Buckeye Community FUC has its members' interests as motivation.
“Our purpose for offering access to these loans is to help our members,” Knowles said. “We have had members over the years who could not afford their normal monthly payments because they got caught up in only being able to make it from payday loan to payday loan,” he added.
Meanwhile, NCUA Board Chairman Debbie Matz pointed out in a statement that the credit union which make these loans through CUSOs remain effectively beyond the reach of the agency's jurisdiction.
“"In 2011, NCUA created an Office of Consumer Protection focused on enforcing consumer laws and regulations that apply to federal credit unions,” Matz said in response to the NCLC letter.
“Of the nine institutions NCLC identified in its report of May 2013, six are making short-term loans through third-party vendors over which we have no statutory enforcement authority.
I am very troubled that these vendors are making high-priced loans using the names of credit unions,” Matz said. “In the three instances where federal credit unions are charging high fees for short-term loans, we will review each case and use every tool at our disposal to resolve the situation."