The NCUA Board has issued a proposed rule that provides federal credit unions (FCUs) with an additional option to offer payday alternative loans (PALs). The proposal does not replace the current PALs rule (PALs I). Rather, it would be an alternative option, with differing terms and conditions—PALs II. The different terms include:

  • Length of Membership Requirement: none
  • Number of Loans: no restriction on number of loans in a certain amount of time
  • Loan Amounts: no minimum; maximum $2,000
  • Loan Term: minimum one month; maximum 12 months

All other PALs I requirements would be incorporated in PALs II.

The NCUA Board is also seeking feedback on the possibility of creating a PALs III loan which could include different loan features, maturities, loan amounts, and fee structures. 

The NCUA's proposal can be read HERE. 
 
Please take a few minutes to complete this brief survey, even if your Credit Union does not now offer these types of loans.

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1. Contact Information

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2. Please indicate if your Credit Union offers small dollar/payday-loan substitute loans. These loans could include:

  • NCUA Payday Alternative Loans (PALs);
  • Small dollar, "short term" loans, loans which are assumed to have a duration of 45 days or less (excluding NCUA PAL loans);
  • The CFPB-defined "longer-term loans" as those with a loan duration of more than 45 days; an all-in APR (including fees and costs of ancillary products) of more than 36%; and a preferred payment position (having a security position in the form of a car title or access to a deposit account); and
  • Similar loans.

Small dollar/payday-loan substitute loans would not include pawn loans, credit card accounts, real estate secured transactions, student loans, or deposit account overdrafts.

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3. Does your Credit Union specifically offer its members NCUA Payday Alternative Loans (PALs?)

PALs have the following characteristics:

  • Loan amounts between $200 to $1,000.
  • The borrower must be a member of the federal credit union for at least 1 month.
  • The term of the loan must range from 1 to 6 months.
  • The federal credit union can charge an application fee only in the amount needed to recoup the actual costs associated with processing the borrowers application, up to $20.
  • The PAL cannot be rolled over.

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4. Please indicate how important the following reasons are for which your Credit Union offers payday alternative loans. If you do not offer these loans, please indicate by rank how important the following reasons would be for your Credit Union to offer such loans.

  Very Important Somewhat important Not important Not applicable
Provide a credit union alternative to predatory loans
Member demand
Profitability
Loan diversity

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5. Which of the following best describes the profitability of your Credit Union's small dollar/payday-loan substitute loans?

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6. Does your small dollar loan program have a higher default rate than your credit union's other loan offerings?

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7. Do you believe the risk of default is higher on small dollar loans than the credit union's other loan offerings?

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8. Do you agree with the Board's proposal to maintain the current PALs rule unchanged, as PALs I, and create a separate more flexible rule for PALs II? Why or why not?

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9. Should the Board allow FCUs to make more than one kind of PALs loan at a time to a borrower (for example, one PALs I loan and one PALs II loan at the same time)? Why or why not?

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10. Should the Board prohibit FCUs from charging overdraft fees for PALs loan payments drawn against a member's account? Why or why not?

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11. Do you agree with eliminating the minimum length of membership requirement for PALs II loans? Why or why not?

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12. Do you agree with eliminating the restriction on the number of loans provided to a  borrower within a certain timeframe for PALs II loans? Why or why not?

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13. Do you agree with increasing the maximum loan amount for PALs II loans from $1,000 to $2,000 and eliminating the minimum loan amount? Why or why not?

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14. Do you agree with increasing the maximum loan term from six months to 12 months for PALs II loans? Why or why not?

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15. What other amendments should the NCUA consider for PALs II loans?

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16. Should the Board propose a third alternative PALs rule? Why or why not?

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17. What features or limits should a PALs III loan include?

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18. Should a PALs III rule contain a limit on the aggregate dollar amount of loans made separate from that permitted for other PALs loans? Why or why not?

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19. Should the NCUA require FCUs to conduct an ability to repay determination for PALs III loans? Why or why not?

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20. Many state payday/small dollar loan laws include deferment, prepayment, and default clauses, among others. Would these, or any similar, features be beneficial to an alternative payday loan program such as PALs III?

Thank you for taking the time to complete this survey. Please contact govaff-reg@ccua.org with any questions.

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