Credit Union Times' recent report about a letter sentby NCUA Board Chairman Debbie Matz to the National Consumer LawCenter and the Center for Responsible Lending led me to questionthe agency's priorities. I continue to be puzzled by why the NCUA,and especially Matz, expends so much energy on a credit unionbusiness practice that isn't even a blip on the credit unionlending radar screen. Although it was certainly appropriate for theNCUA chairman to respond to these strident consumer activistorganizations' complaints, combating payday lending, contrary towhat the chairman implies, is not mandated by the Federal CreditUnion Act and has very little to do with safety and soundness.

When one looks at the bigger picture, the NCUA's short-termsmall amount loan program has accomplished diddly-squat. Anysuggestion that credit union payday loan alternative lending canreplace the conventional store-front retail or Internet payday loanindustries is at best disingenuous and at worst blatant politicalpandering. Although each credit union member who got a cheapershort-term loan from a credit union was helped, the math suggeststhat just not that many consumers out of the nearly 52 milliontotal members of federally chartered credit unions have benefited.When compared to the entire multibillion dollar payday loanindustry, the credit union involvement is not even a drop in thebucket.

Payday lending accounts for less than one-one hundredth of onepercent of federally charter credit unions' loan portfolios. Iwonder how the chairman calculated the numbers that gave her theconfidence to state that the program “has saved consumers millionsof dollars.” How was that savings measured and how detailed was thedata?

Chairman Matz also advised the anti-payday loan activists that“Our ultimate goal is to empower borrowers to break free of theirreliance on payday loans by improving their credit scores andqualifying them for lower-priced financial services.” I'm not surewho the chairman is including in “our,” and I don't recall readingabout this in the NCUA's 2013 annual performance plan thatestablished NCUA's priorities. The agency's focus on payday lendingalternatives would be considered by many within the credit unionindustry to be a waste of limited resources.

Chairman Matz also advised the activist groups that the NCUA hasinitiated inquiries into the nine federal credit unions theactivists identified as offering high-priced, short-term loans. Indoing so Chairman Matz misguidedly dissed Xtra Cash LLC, a CUSOthat makes payday loans to credit union members. The chairman went out of her way to advise the activists that NCUAdoesn't examine CUSOs–something that the NCUA sorely wants to dodespite the lack of statutory authority.

She also advised that, “I believe NCUA has made progress in thefight against predatory lending, but we recognize our work is notyet done.” The two ideologically-entrenched activist groups believethat all payday loans, including those made by credit unions, areby definition predatory. They are urging the Consumer FinancialProtection Bureau, the Federal Deposit Insurance Corp. and theComptroller of the Currency to stomp down hard on this financialproduct. It would appear that the NCUA is about to join these otherregulators on the activist groups' credit-restricting bandwagon.While that would have little impact on the credit union industry,it would certainly drive payday loan borrowers to higher costalternatives. This NCUA pandering to whining activist groups willnot end well.

Marvin Umholtz
President/CEO
Umholtz Strategic Planning & Consulting Services
Olympia, Wash.