ALEXANDRIA, Va. – Federal credit union alternatives to payday loans could range from $200 to $1,000, have a maximum APR of 1,000 basis points above the interest rate ceiling and charge no more than $20 to apply.
Those are among the provisions of the proposed rules that the NCUA Board voted unanimously today to send out for a 60-day comment period.
Under the current interest rate ceiling, the maximum APR would be 28% at last Thursday's meeting. The loans could be for a minimum of one month and a maximum of six months and any member couldn't have more than one such loan from any one credit union at the same time.
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In response to a question from NCUA Board Member Michael Fryzel,
NCUA Staff Attorney Justin Anderson said there is no requirement that the credit union find out whether the member has any similar loans from other credit unions or to run a credit report on the prospective borrower.
NCUA Chairman Debbie Matz said that while there is considerable interest among credit unions in expanding their activities in this area they "need to do this very carefully." And she added that the proposal balances the needs of some people for access to short-term loans with the need to protect the safety and soundness of federal credit unions.
According to the agency, 352 federal credit unions offer alternatives to pay-day loans and 605 offer micro loans, those with a principal of less than $500. Anderson said the rules change wouldn't impact open-end loan programs and wouldn't prohibit a federal credit union from continuing existing closed-end programs, as long as they are complying with NCUA and Federal Reserve rules.
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