ALEXANDRIA, Va. NCUA told consumer advocates concerned with credit unions offering high-priced payday loans it’s hands are tied because the credit union regulator has no legal authority over a payday lending CUSO.
“I am very troubled that this particular vendor is making high-priced loans using the names of credit unions,” NCUA Chairman Debbie Matz said in a letter sent today to the National Consumer Law Center and Center for Responsible Lending, which raised the issue in a May 16 letter to the agency. “NCUA is investigating credit union affiliation with Xtra Cash LLC and will take action against any credit union violating a law or regulation.”
The two consumer groups were instrumental in causing the demise of two previous high-priced payday loan operations operated by credit unions known as eAccess Loans and CU on Payday, which were cited in a 2011 report by the Boston-based Consumer Law Center.
NCUA generally caps interest rates allowed on loans provided by federally chartered credit unions at 18%, but allows the rate to rise to as much as 28% for payday loans.
NCUA has been working to obtain more legal authority over CUSOs but has been stymied by stiff opposition from the credit union industry.
Matz told the consumer advocates that federally chartered credit union may not refer their members to a payday loan provider with an annual percentage rate in excess of NCUA’s interest rate ceiling in exchange for a fee. “NCUA will review each case and use every tool at our disposal to ensure the FCUs are complying,” she wrote in the letter.
The other four credit unions identified by the consumer groups are either offering an alternative to predatory payday loans in accordance with the NCUA rules or are offering a lending product in accordance with the Federal Reserve’s Regulation Z, said Matz.
