Mellin writes comment letter in favor of NCUA’s PAL II proposal


In a recent letter to NCUA, Association President/CEO William J. Mellin said New York’s credit unions were generally in favor of the agency’s proposal to provide credit unions with greater flexibility in offering Payday Alternative Loans.

Since 2010, NCUA has encouraged federal credit unions to offer non-predatory short-term loans. Federal credit unions offering PALs are authorized to exceed the federal interest rate cap by ten percentage points. NCUA has proposed authorizing credit unions to offer an additional type of short-term loan, referred to as PAL II.

The terms and conditions for credit unions offering non-predatory short term loans would vary, but the increased flexibility to provide PALs would help credit unions and consumers, Mellin explained.

In particular, he commended the agency for its proposed plan to nix the requirement that consumers be members of the credit union for at least a month before being eligible to receive a PAL.

“The overriding goal of any regulatory framework governing short-term loans should be to give consumers as many alternatives to taking out payday loans as possible,” he wrote. “Consequently, it never has made sense for NCUA to mandate that PALs should only be made available to persons who are credit union members for at least a month.”

Mellin went on to say that NCUA was correct in its plan to raise the maximum amount of short-term loans from $1,000 to $2,000 under the proposal. However, he also pointed out that not all the types of PAL products being considered by NCUA would be exempt from the CFPB’s payday loan regulations. As such, he encouraged NCUA to join with credit unions in advocating for the CFPB to further extend the exemption given to credit unions that offer PALs.

“The American public needs short-term loan options,” he concluded. “In the meantime, this proposal gives federal credit unions important new ways to help our members.”

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