NCUA FINAL RULE ON SHORT-TERM, SMALL AMOUNT LOANS
The National Credit Union Administration (NCUA) has issued a final rule to enable federal credit unions (FCUs) to offer short-term, small amount loans (STS loans) as an alternative to payday loans. 75 Fed. Reg. 58285 (Sept. 24, 2010). The final rule:
- Permits FCUs to charge an interest rate of 28% (i.e., 1000 basis points above the approved ceiling, which currently is 18%) plus a $20 application fee for an STS loan of $200 to $1,000 for a term of one to six months.
- Requires an FCU to cap the total dollar amount of STS loans at 20% of net worth.
- Sets a length of membership requirement of at least one month.
- Requires STS loans to be fully amortized.
The final rule also includes guidance in the form of “best practices” FCUs should consider incorporating into their STS programs.
The rule is effective October 25, 2010.