AUSTIN, Texas – Credit unions in Texas are opposing a proposal by the state CU Department to set new limits on fees for payday loans – just as credit unions across the state are rolling out their own payday loan product.
"The real key here is it’s a rule that’s not needed," said Jeff Huffman, chief lobbyist for the Texas CU League, which last week introduced a payday loan program designed by the REAL Solutions program.
The rule proposed by the state’s CU Department, which must be approved by the nine-member CU Commission, would cap fees at $20 for unsecured loans of $1,000 or less for six months or fewer. It also would limit the amount of payday loans to no more than 20% of a loan portfolio.
The CU Department proposed the rule based on state legislation that sets caps on payday loans fees offered by banks, according to Harold Feeney, commissioner of the CU Department. "The statute allows credit unions to charge a ‘reasonable fee,’” Feeney told Credit Union Journal. "The legislature has set limits on fees charged for everyone but credit unions. Credit unions would prefer that we not define it."
About 50 of the state’s 207 state charters submitted letters opposed to the proposal in the just-completed comment period.
"We think that credit unions’ boards and management are really in the best position to determine the fees based on their individual situations," said the Texas League’s Huffman, explaining that market conditions vary across the state. “We don’t think the regulator should get involved [in setting the fees]."
"They ought to get off the backs of credit unions," he said. "It’s just a rule that unnecessary."
The CU Commission is expected to vote on the rule at its June meeting.
