NCUA alert briefs credit unions on CFPB payday rule, which remains stayed under court order

The National Credit Union Administration (NCUA) on Thursday issued a regulatory alert outlining for credit unions the key provisions of the Consumer Financial Protection Bureau’s (CFPB) payday lending rule, as revised last month.

The NCUA alert also reminds that the compliance deadlines under the CFPB’s payday lending rule are stayed under a court order due to pending litigation. In light of that, the CFPB has delayed the compliance deadline for its rule until Nov. 20, 2020. Compliance won’t be required before that date and not until the stay is lifted.

The alert notes that in its July revisions to the rule, the CFPB rescinded the following:

  • Requirement for a lender to determine a borrower’s ability to repay before making a covered loan;
  • Underwriting requirements for making the ability-to-repay determination; and
  • Some recordkeeping and reporting requirements.

Provisions relating to payment withdrawal restrictions, notice requirements, and related recordkeeping requirements for covered short-term loans, covered longer-term balloon payment loans, and covered longer-term loans were not changed by the July final rule, the alert states.

As noted Wednesday here, loans by credit unions that meet conditions of the NCUA’s PALs I program (“PALs” being short for payday alternative loans) are not subject to the CFPB’s payday rule; the PALs I program features terms and conditions that meet the bureau rule’s provision exempting defined “alternative” loans.

As for PALs II loans, the credit union regulator noted that such loans, depending on the terms, may be a conditionally exempt alternative loan or accommodation loan under the CFPB payday rule. However, a loan that complies with all PALs II requirements and has a term longer than 45 days is not subject to the CFPB payday rule, the NCUA noted. The bureau’s payday rule applies “only to longer-term loans with a balloon payment, those not fully amortized, or those with an APR above 36 percent. The PALs II rules prohibit all those features,” it noted.

NCUA Regulatory Alert (20-RA-07)