Letters to Credit Unions 20-CU-04 Responsible Small-Dollar Lending in Response to COVID-19
NCUA issued LTCU 20-CU-04 to alert credit unions that NCUA and the other federal financial regulators issued a Joint Statement Encouraging Small Dollar Lending in Response to COVID-19. NCUA encourages credit unions to offer responsible small-dollar loans to consumer and small business members.
NCUA notes that credit unions have the ability to help members meet small dollar needs for unexpected expenses by offering a variety of products such as:
- Open-end lines of credit
- Closed-end installment loans
- Single payment loans
NCUA notes that federal credit unions have the option of offering NCUA PALs I and II loans.
NCUA also encourages credit unions to consider workout strategies designed to help borrowers experiencing financial distress. NCUA stresses that credit unions should offer products in a manner that is safe, sound, and fair to members while complying with all applicable laws and regulations.
The Joint Statement was issued by Federal Reserve Board, the FDIC, the NCUA, the OCC and the CFPB on March 26, 2020. The Statement focused on short term small dollar loans was a follow-up to a March 9, 2020 Joint Statement issued by the agencies encouraging institutions to meet the financial needs of their customers/members impacted by the COVID-19 crisis.