A recent NCUA letter to federal credit unions drew some lines to govern the characteristics of payday loan alternatives federal credit unions can offer.

“An FCU’s program should be designed ultimately to try to help members end their reliance on payday loans and guide members toward the FCU’s more mainstream, low-cost financial products and services, including financial counseling,” the NCUA wrote before explaining how some FCU payday loan programs did not meet that standard.

For example, the agency said a permitted program might offer a loan of $500 for 120 days at 16.9% APR and no fees. Minimum payments are due each payday and if a member has received two loans they must receive a budget counseling course before taking out the third.

Examples of programs the agency would not permit included one that carried a 0% APR but included a 20% application fee.

“The 20% fee does not accurately reflect the costs of processing applications so the fee should be considered a finance charge under Reg Z and be included in calculating the APR. This would raise the APR above the 18% ceiling,” the agency wrote.