Christmas shopping help? Credit union agency’s new payday loan takes effect first Monday after Thanksgiving

A new rule allowing credit unions to issue payday loans of any amount up to $2,000, fully amortized over a term of one to 12 months, will take effect the first Monday after Thanksgiving, according to a filing by the federal credit union regulator.

The notice by the National Credit Union Administration (NCUA), scheduled to be published Tuesday in the Federal Register, indicates that the payday alternative loans (PALs) II rule adopted by the agency this month will take effect Dec. 2.

The final rule creates a “PALs II” option that will reside alongside the current PALs I framework. (Under PALs 1, a payday-alternative (small-dollar, short-term) loan can be from $200 to $1,000 and can have a term from one to six months.) The final rule also bars charging any overdraft or non-sufficient funds (NSF) fees in connection with any PALs II loan payment drawn against a borrower’s account.

The final rule results in two PALs frameworks even though many of those commenting on the proposal preferred to see them combined into one. NCUA said keeping the two versions preserves the safe harbor that PALs I loans enjoy under the Consumer Financial Protection Bureau (CFPB) short-term, small-dollar loan regulation, which is currently under revision.

NCUA final Payday Alternative Loans (PALS) II rule