Consumer Financial Protection Bureau building in Washington, D.C. Photo by Diego M. Radzinschi
As the CFPB rewrites portions of its payday lending rule, state credit union leagues and national trade groups are calling for a delay in implementation and a broad exemption for short-term loans made by credit unions.
"We fully support the fight against unscrupulous payday lenders and vehicle title lenders, and we will oppose changes that would allow them to continue preying on the poorest of Americans; however, the rule in its current form unfairly lumps in pro-consumer credit unions with predatory storefront payday and vehicle title lenders," Paul Guttormsson, vice president of legal and compliance at the Wisconsin Credit Union League, wrote, in urging the agency to delay the mandatory underwriting provisions of the rule.
The CFPB has been seeking comment on a proposal to delay the mandatory underwriting provisions of the payday rule for an additional 15 months to November 19, 2020.
Separately, the bureau is reviewing the ability to repay provisions of the payday rule and is still seeking public comment on that plan. Agency officials have said they want the delay because financial institutions may begin planning to implement the underwriting requirements, only to have parts of the rule rescinded.
Credit union representatives also have noted that the NCUA is currently considering a plan to offer another loan model based on its Payday Alternative Loan program. They said that the CFPB rule could go into effect before that model is implemented.
The Small Business Administration's Office of Advocacy cited the regulatory uncertainty in supporting the delay.
"A fifteen-month delay would allow ample time for the CFPB to review NCUA's changes to the PALs, and to identify inconsistencies and resolve problems that were not considered in 2017," SBA officials wrote.
The national trade groups are seeking a board exemption from the rule.
"CUNA continues to strongly urge the CFPB to further examine and revise its payday rule to avoid any negative effects on credit unions' small-dollar loan programs while still holding accountable non-depository payday lenders, especially those entities with histories of bad behavior," said Alexander Monterrubio, CUNA's senior director of advocacy and counsel.
NAFCU Regulatory Affairs Counsel Kaley Schafer said that the trade group cannot fully support a revised rule that does not exempt all future loan programs modeled after PAL loans.
She said expanding the safe harbor for current PAL loans would encourage credit unions to offer short-term loans.
"An expansion of the safe harbor exemption would give credit unions peace of mind knowing that they are compliant with both the NCUA's and the Bureau's rules," she wrote.
And while many credit unions do not offer short-term payday alternative loans, there is an interest in expanding such programs, said Michael Lee, director of regulatory advocacy with the League of Southeastern Credit Unions.
"The delay of the implementation date until the parameters of the final rule are concrete is an appropriate step to prevent credit unions from investing in unnecessary compliance spending," he said.
Consumer advocates, however, opposed the delay.
"By allowing lenders to continue their abusive practice, it would irreparably injure the many consumers for whose benefit the protections were promulgated," officials from Public Citizen wrote in a letter to the CFPB. "The CFPB's proposal provides no meaningful reason for delay."
Consumer advocates also are active this week in Florida, where the payday lending association, the Consumer Financial Services Association of America, is holding its annual conference at Doral Miami, a resort owned by the Trump family.
"Stop the Debt Trap," a coalition of groups opposing the payday lending industry has scheduled an airplane flyover with a message near the resort. In addition, the group will have a mobile billboard circulating through the area, as well as digital advertising.
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