NCUA Board today in a 2-1 vote, approved another option for short-term, small dollar borrowing under the payday alternative loan model

The final rule, known as PALs II, does not replace the existing payday alternatives loan rule that has been available to federally chartered credit unions since 2010.

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“The PALs II rule is a free-market solution that responds to the need for small-dollar lending in the marketplace,” NCUA Chairman Rodney E. Hood said. “This can make a difference by helping borrowers build or repair credit records, allowing them to graduate to other mainstream financial products."

The final rule would allow a federal credit union to:
• Set the maximum loan amount at $2,000 and eliminates the minimum loan amount.
• Require a loan term of at least one month with a maximum of 12 months.
• Does not require a minimum length of credit union membership.
• Restrict offering only one type of PALs loan to a member at any given time.

The final rule will become effective 60 days after publication in the Federal Register.

The Board also approved a final rule to clarify, update and simplify federal credit union bylaws. The final rule will become effective 90 days after publication in the Federal Register.