Credit Unions Suggest NCUA’s PAL Proposal Needs More Work

At the end of May, the National Credit Union Administration proposed a rule that would provide credit union member with more options to offer short-term, small-dollar lending products. These products would come on top of the Payday Alternative Loans (PALs I) that have been permitted since 2010.

The proposed PALs II could be offered in amounts up to $2,000, with no minimum loan amount and a maximum loan term of 12 months.

During the 60 day comment period, Credit Unions weighed in and, according to the Credit Union Journal, are sending NCUA back to the drawing board on the proposal. 46 comment letters were published, highlighting various issues with interest rates, fees, window terms, and maximum offering amounts.

“The majority of responding institutions welcomed the changes but did so with caution and overlapping concerns, with many suggesting that the 28 percent APR could pose a significant barrier to entry,” the Credit Union Journal writes. “Many also agreed that the loan term and loan amount limits were not substantial because of its brevity.”

In one comment letter, Cathie Mahon, CEO and President of the National Federation of Community Development Credit Unions, writes that the assumptions underlying the proposed rule need more research and study from stakeholders throughout the industry.

The NCUA Board “fails to provide any data or information that would suggest that the adoption of this rule and PALs II program would significantly expand or grow this lending to consumers,” she writes.

You can read all of the responses here.