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Board Proposes Second Payday Alternative Loan Option, Seeks Comment on a Third

Board Action Bulletin

Share Insurance Fund Posts $33.1 Million Net Income in First Quarter

ALEXANDRIA, Va. (May 24, 2018) – The National Credit Union Administration Board held its fifth open meeting of 2018 at the agency’s headquarters today and unanimously approved two items:

  • A notice of proposed rulemaking seeking comment on the agency’s proposal to provide federal credit unions with additional options for payday alternative loans.
  • A final rule clarifying agency procedures for resolving severance claims arising from involuntary liquidations.

The Chief Financial Officer briefed the Board on the performance of the National Credit Union Share Insurance Fund, which posted a net income of $33.1 million in the first quarter, primarily due to the strong investment income earnings.

 

New Payday Alternative Loan Would Give Federal Credit Unions Second Option

Federal credit unions would have a second payday alternative loan option under a proposed rule (Part 701) approved by the Board.

The proposed payday alternative loan option would not replace the current payday alternative loan program, created in 2010, but would be a distinct product. This product would have features to help federal credit unions meet specific needs of certain payday loan borrowers that are not met by the current program and provide those borrowers with a safer, less expensive alternative to traditional payday loans.

During the fourth quarter of 2017, 503 federal credit unions reported making payday alternative loans under the NCUA’s current rules. At the end of the fourth quarter of 2017, federal credit unions held $38.6 million in payday alternative loans on their books.

The proposed PALs II program would include most of the features of current payday alternative loan program, with four changes:

  • Sets the maximum loan amount at $2,000 and eliminates the minimum loan amount.
  • Sets the maximum term of the loan at 12 months.
  • Does not require a minimum length of credit union membership.
  • Does not include time a restriction on the number of loans a federal credit union may make to the borrower in a six-month period, provided the borrower has only one outstanding loan at a time.

Board members also are seeking comment on a possible third option, asking, in particular, for opinions on interest rates, maximum loan amounts, loan terms, and application fees.

Comments on the proposed rule must be received within 60 days of publication in the Federal Register.

 

Share Insurance Fund Shows Strong Operating Trends

The National Credit Union Share Insurance Fund posted a net income of $33.1 million in the first quarter of 2018, primarily due to the strong investment income earnings.

The Share Insurance Fund’s net position was $15.0 billion at the end of the first quarter of 2018.

First-quarter investment and other income was $72.0 million, or a 42.6 percent increase in income over $50.6 million during the first quarter of 2017. Operating expenses were $43.1 million. The provision for insurance losses decreased by $4.2 million.

For the first quarter of 2018, the Chief Financial Officer reported:

  • The number of CAMEL codes 4 and 5 credit unions increased 2.0 percent from the fourth quarter of 2017 to 200 from 196. Assets for these credit unions decreased 4.2 percent from the fourth quarter of 2017 to $9.2 billion from $9.6 billion.
  • The number of CAMEL code 3 credit unions declined 1.7 percent from the fourth quarter of 2017 to 1,054 from 1,072. Assets for these credit unions increased 2.7 percent from the fourth quarter of 2017 to $57.4 billion from $55.9 billion.

Two federally insured credit unions failed during the first quarter of 2018, compared to two in the first quarter of 2017. Total year-to-date losses associated with credit union failures are $1.2 million, compared to $3.7 million in the first quarter of 2017. At this time, fraud is not a contributing factor in either failure in the first quarter.

The first-quarter figures are preliminary and unaudited.

 

Final Rule Clarifies Severance Claims Process in Involuntary Liquidations

Credit union employees will have a new process for making severance claims following involuntary liquidations under a final rule (Part 709) approved by the Board.

The rule clarifies the requirements for proof of a claim by an employee for pay or benefits such as unpaid wages, sick time or vacation time and makes a distinction between employees’ claims and claims by a credit union executive that constitute a golden parachute.

The final rule will become effective 30 days after publication in the Federal Register.

The NCUA tweets all open Board meetings live. Follow @TheNCUA on Twitter, and access Board Action Memorandums and NCUA rule changes at www.ncua.gov. The NCUA also live streams, archives and posts videos of open Board meetings online.




NCUA is the independent federal agency created by the U.S. Congress to regulate, charter and supervise federal credit unions. With the backing of the full faith and credit of the United States, NCUA operates and manages the National Credit Union Share Insurance Fund, insuring the deposits of account holders in all federal credit unions and the overwhelming majority of state-chartered credit unions. At MyCreditUnion.gov, NCUA also educates the public on consumer protection and financial literacy issues.

--NCUA--

Office of Public & Congressional Affairs

703.518.6330
pacamail@ncua.gov

Contacts:

John Fairbanks
Office: 703.518.6336
Mobile: 571.438.0801
jfairbanks@ncua.gov

Ben C. Hardaway
Office: 703.518.6333
Mobile: 703.298.5223
bhardaway@ncua.gov

Kenzie Snowden
Office: 703.518.6334
ksnowden@ncua.gov

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9/20/2018 5:53 PM