The Honorable Richard Cordray
Consumer Financial Protection Bureau
1275 First Street, NE
Washington, DC 20001
Dear Director Cordray:
On behalf of America’s cooperative credit union and community banks, and the numerous consumers to whom our members supply small dollar and other credit, The Credit Union National Association (CUNA) and the Independent Community Bankers of America (ICBA) are writing to express serious concerns about the Consumer Financial Protection Bureau’s (the Bureau) recent proposed rule for Payday, Vehicle Title, and Certain High-Cost Installment Loans (proposed rule), which sweeps in numerous consumer-friendly products offered by our members.
While we believe predatory or violent lending practices should have increased scrutiny, credit unions and community banks have no history of bad habits when offering small dollar loans. Quite the opposite, they often offer consumer-friendly short-term credit as a service to customers.
In your remarks at the field hearing on the proposed guideline in Kansas City, MO on June 2 you mentioned, in certain, we are not intending to interrupt existing financing by neighborhood banks and cooperative credit union that have actually discovered efficient and efficient ways making small-dollar loans to consumers that do not cause financial obligation traps or high rates of failure. Undoubtedly, we want to encourage other lenders to follow their design.
We value your acknowledgment that our members provide little dollar loans in consumer-friendly methods, which these items are frequently the very best alternative for those in need of a small dollar loan. The proposed rule, if finalized in its present type, would certainly disrupt financing by credit unions and neighborhood banks. We believe the incredibly complicated and authoritative nature of this more than 1300-page proposed guideline and the compliance concerns arising from it will lead community banks and cooperative credit union to curtail or eliminate existing products and eliminate rewards to innovate or develop brand-new consumer-friendly, short-term products and small dollar loans.
CUNA and ICBA strategy to send detailed remark letters describing our specific issues about how the proposed rule will restrict credit accessibility from cooperative credit union and neighborhood banks, however we wished to immediately signal you about our broader worry about the proposed guideline.
The Underwriting and Other Requirements Are Unnecessarily Complex for Depository Institutions.
The proposed guideline would make it an abusive and unreasonable practice for a loan provider making a covered short-term or longer-term loan without determining in advance that the consumer will have the ability to pay back the loan, in exactly what the Bureau calls the full-payment test. The requirements described in the proposed rule, including the exceptions to the general rule, are extremely intricate and prescriptive, and irregular with how cooperative credit union and community banks that know their members and clients finance a loan that can be for a relatively little quantity of money. Small dollar loans offered by credit unions and neighborhood banks do not fit into one particular category and subjecting them to a lengthy list of requirements would certainly considerably decrease customer choices for these loan products.
The recognition by the Bureau of the need for consumer friendly products from depository institutions is a great initial step and we truly value the Bureau attempting to supply exceptions for those acting responsibly in the monetary services marketplace. However, these exceptions are extremely complex and limiting and need to be much wider in order to meaningfully attain the goal of guaranteeing credit unions and neighborhood banks stay in this market.
If the Bureau s intent is for depository organizations to serve more customers in need of short term, small dollar loans, we believe the proposed guideline not only disappoints that objective however will almost certainly cause cooperative credit union and community banks providing short-term, little dollar loans and comparable programs like the PAL program to exit the market.
Consumers Will Lose Access to Credit Under the Proposed Rule.
As noted, we have extremely significant concerns that the proposed guideline would hurt customers in need of small dollar loans and make it tough for credit unions and neighborhood banks to serve those consumers. As you have acknowledged, cooperative credit union and neighborhood banks are one of the very best alternatives for consumers in requirement of this credit. If credit unions and neighborhood banks are managed out of this market, we are very worried about the options consumers will be left with, which might include uncontrolled and unlicensed predatory loan providers.
We are enthusiastic that you will continue to work carefully with us over the next few months to develop a governing environment that permits community banks and cooperative credit union to satisfy the needs of more members and customers, and does not eliminate more economical and much safer alternatives.
On behalf of America’s credit unions and community banks and the numerous countless customers they serve, thank you for your focus on these vital concerns. We will reach out to your staff to discuss our concerns in greater information in the future.
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