NCUA Proposes New Payday Alternative Loan Option

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The National Credit Union Administration is proposing to add an additional payday alternative loan option for federal credit unions.  Comments are due on August 3, 2018.

This new payday alternative loan option (“PAL II”) would build off of the current payday alternative loan option (“PAL I”) federal credit unions can provide to its members.  However, for PAL II loans, the National Credit Union Administration proposes to:

  • Increase the maximum loan amount to $2,000 (PAL I’s current loan amount maximum is $1,000);
  • Increase the maximum loan term to twelve months (PAL I’s current maximum loan term is six months);
  • Remove the minimum length of membership required (for a PAL I loan, a person must be a member of the federal credit union for at least one month to qualify for the loan); and
  • Remove the limit on the number of loans a federal credit union member may receive in a rolling six month period (a federal credit union can only make three PAL I loans to any one member in a rolling six month period).

While the PAL II loans will not qualify for the safe harbor applicable to PAL I loans under the CFPB’s Payday Loan Rule, the PAL II loans can qualify under the “alternative loan” exemption under the CFPB’s Payday Loan Rule.

The entire proposed rule can be found here.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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