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NCUA offers guidance for CFPB's small dollar lending rule
The NCUA Thursday released a Regulatory Alert for credit unions to provide guidance on the CFPB's Small Dollar Lending Rule. The rule, finalized last month, includes the rescission of mandatory underwriting requirements – including ability-to-repay (ATR) provisions – from the 2017 payday lending rule.
NAFCU supported the removal of mandatory underwriting requirements but had called for an expansion of the safe harbor for credit unions' payday alternative loans (PALs), as the rule only covers the first iteration of the NCUA's PALs program.
PAL II and non-PAL loans may be structured in a way to fall within one of the conditional exemptions.
In the Regulatory Alert, the NCUA notes which loans are covered, excluded, or conditionally exempted from coverage under the CFPB’s Small Dollar Lending Rule and outlined key provisions of the rule that will affect credit union lenders, including:
- a lender must calculate the finance charge the same way it is calculated under Regulation Z;
- generally, for covered loans, a lender is unable to attempt more than two withdrawals from a consumer’s account;
- a lender must establish written policies and procedures designed to ensure compliance; and
- a lender must retain evidence of compliance for 36 months after the date on which a covered loan is no longer an outstanding loan.
Read the agency’s full Regulatory Alert. The rule is effective Oct. 20.
Earlier this week, the CFPB released several new FAQs related to the rule, covering a variety of topics related to covered loans, payment transfers, and payment notices. The Bureau has also issued a Policy Statement on Compliance Aids to explain the Bureau's approach to compliance aids and has additional resources, including a small entity compliance guide, available. The NCUA is still gauging the market to determine whether there is an appetite for a PALs III iteration.