The PALs I rule in 2010, the Board amended the NCUA’s general lending rule, В§ 701.21, to provide a regulatory framework for FCUs to make viable alternatives to payday loans. 9 The PALs I rule, В§ 701.21(c)(7)(iii), allows an FCU to supply to its users a PAL loan, a kind of closed-end credit rating, at a greater APR than other credit union loans so long as the PAL has particular structural features, produced by the Board, to safeguard borrowers from predatory payday financing methods that will trap borrowers in duplicated borrowing cycles.
An FCU might also refinance a conventional cash advance into a PALs I loan.
The potential for вЂњloan churning,вЂќ the practice of inducing a borrower to repay an existing loan with another loan without significant economic benefit to the borrower, by prohibiting an FCU from rolling one PALs I loan into another PALs I loan for example, the PALs I rule eliminates. 10 whilst the Board formerly explained, вЂњthese provisions of the PALs I rule will continue to work to curtail an associate’s repetitive use and reliance about this variety of item, which frequently compounds the user’s currently unstable monetary condition . . . Continue reading