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Initial Analysis Indicates Improvements to CFPB’s Small Dollar Lending Rule

Mon, Oct 9, 2017

The CFPB’s final rule on payday and small dollar lending appears to have addressed many concerns raised by the leagues, credit unions and CUNA. The Association’s Advocacy Team and CUNA continue to analyze the nearly 1,700-page final rule.

The rule, as originally proposed last summer, swept in a number of credit union short-term, small-dollar loan products which had the potential to rob consumers of safe and affordable credit union alternatives to predatory loans.  

Initial analysis of the rule indicates that there are many positive improvements, including:

  • The NCUA PAL Program appears to be completely carved out 
  • Loans that are over 45 days with no balloon payments appear to be exempt for the most part (unless the APR which is no longer 'All-In' is above 36 percent) 
  • There is an exemption for any provider doing fewer than 2500 otherwise-covered loans and which represent no more than 10% of revenue. 
  • The notice and debit requirements that apply to most covered loans do not apply to loans from credit unions that make loans to their own members if the payments do not trigger overdraft or NSF fees. 
  • Certain Salary advances are exempted 
  • CFPB is using Regulation Z to define cost of credit rather than its previously proposed definition of a new All-in APR  
  • It appears very unlikely that any auto refinance loans will be included as covered loans under the improved consideration of what is included  

The Association will continue to analyze the rule to determine its full impact.  

Last year, CUNA and the Leagues met with the CFPB over a dozen times and filed extensive comments outlining the problems with the original proposal.