Accusations of Payday Lending at Credit Unions
by Keith Leggett
The National Consumer Law Center (NCLC) and the Center for Responsible Lending (CRL) wrote NCUA Chairman Debbie Matz asking NCUA to stop federal credit unions from making triple-digit payday loans.
The letter alleges that some federal credit unions are making balloon-payment, short-term loans with APRs approaching 300 percent — well-above the legal 18 percent usury cap.
NCLC in a recent study names nine federal credit unions in five states for making triple digit payday loans (see below).
The letter also states that the reputation of the rest of credit union industry is at risk because of the behavior of these few credit unions.
The letter notes that in some cases credit unions are partnering with credit union service organizations (CUSOs) to make the loans.
The two consumer groups recommend that “[w]hen FCUs offer their name to CUSOs, NCUA should tighten up its finder’s fee rule to ensure that FCUs are not incurring third party risk and profiting off of loans that are illegal for them to make directly.”
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