DOD May About Face on CU Payday Loans: Onsite Reporting
MONTREAL – The Department of Defense may reconsider a proposal that would have prevented some credit unions from offering the NCUA’s small dollar loans to members.
NCUA Chairman Debbie Matz made the announcement Thursday morning during her speech at NAFCU’s annual conference.
The DOD’s proposed regulation would cap small dollar loans to military personnel at an annual percentage rate of 36% and include fees in that calculation. By itself, the 36% cap is not new, but including fees in the calculation would force many credit unions’ small dollar loans over the limit, Matz said in May during a speech to the Defense Credit Union Council’s Overseas Subcouncil in Dublin, Ireland.
After the proposed rule was announced in September, credit union trade associations and the NCUA pleaded their case to the DOD and even former Colorado Senator Mark Udall, who had sponsored member business lending legislation and also spearheaded the DOD’s efforts to tighten payday lending rules.
Industry stakeholders and the NCUA tried to convince the DOD the NCUA’s small dollar loan regulations were fair to military borrowers. The requests fell on deaf ears until Matz’ speech produced a phone call to the NCUA’s Office of Consumer Protection the following day.
Matz also said the NCUA is writing a supplemental capital rule for risk-based capital.
“It turns out that under current law, the NCUA could count certain forms of debt as supplemental capital for the risk based capital ratio. For example, subordinated debt could be issued to members and non-members — but it would be uninsured,” she said.
Matz added she is committed to counting supplemental capital in full as it applies to RBC ratio, and will release a proposed rule for comment in the fall, with an effective date that would coincide with RBC implementation in 2019.
She also provided an update on the NCUA’s anticipated changes to field of membership rules, saying the agency was focused on broadening community charters, improving occupational charters and streamlining the process for federal credit unions to add new members.
Matz further updated the audience on the NCUA’s progress to eliminae the 5% fixed assets cap, finalize an asset securitization rule, ease restrictions on member business lending and increase the definition of a small credit union to $100 million when exempting them from future rules.
However, the chairman also cautioned that the proposals will require retraining examiners, which will require additional time and resources from the NCUA.