Ben Morales, CEO, QCash Financial and chief technology officer at Washington State Employees CU
"QCash Financial would like to offer an alternate suggestion to the NCUA as a formal comment on the most recent NUCA PAL proposal for federal credit unions. It is our belief that these programs, when responsibly marketed, priced and managed can effectively meet the short-term borrowing needs of consumers at an affordable and risk-focused price, while steering vulnerable consumers away from debt traps and providing necessary financial wellness resources. Our recommendation would bring the NCUA PAL program in line with existing regulatory requirements from the DOD and CFPB, and preserve the exemption the PAL program enjoys under the newly issued CFPB payday loan rule. We have seen, first-hand through our clients, the benefit of a thoughtfully designed and tailored program can bring to consumers and credit unions, and we respectfully request adequate consideration to our thoughts below.
As is stands, the PAL program has low adoption and we applaud the board’s attempts to offer additional options to FCUs to enter this space and offer payday alternative loans to meet the short-term liquidity needs of their members. The alternatives contemplated, which if promulgated as proposed will modify loan amounts, terms, frequency, and membership requirements, are a good step forward for America’s FCUs. However, the rule construction is unnecessarily complex. Our recommendations, as outlined herein, shore up what we have observed as problems in the proposed rule and will serve to meet your stated objectives, while enhancing regulatory certainty and bringing parity to the short-term lending industry at large.
Proposed rule language amendments are recommended. Specifically, we recommend editing §701.21(c) as follows:
1. Strike the proposed edits to §701.21(c)(7)(iii) that rename the program PALs I entirely. It is important that the program name not change.
2. Strike the new section under proposal to be added to 12 CFR 701.21 (701.21(c)(7)(iv))for the description of PALs II.
3. Alternatively, revise §701.21(c)(7)(iii) by adding 701.21(c)(7)(iii)(B) and renumbering 701.21(c)(7)(iii)(B) as 701.21(c)(7)(iii)(C). This way it defines a longer term option of a permissible small dollar loan under the overall PAL program section name, instead of being called out and named separately."