Question:

Hi Heather. I feel like I am late to the game here, because I am just hearing about the CFPB Payday Lending Rule. I am trying to understand how this will affect our credit union. I’m especially concerned because the credit union offers longer-term balloon payment, closed-end loans for RVs. If we offer refinance transactions on our RV loan products, would it be excluded from this rule or would it be included since it is not a purchase?

Great Question!

You’re not late to the game, although this rule was originally supposed to go into effect in 2019! But it has been subject to numerous lawsuits, injunctions, stays, re-writes, etc. In addition, this rule just doesn’t apply to most credit unions.  So we haven’t spent a lot of time covering this one.

It sounds like the longer-term, balloon payment RV loans (that aren’t a purchase transaction) would be covered if “the consumer is required . . .  to repay such loan through at least one payment that is more than twice as large as any other payment(s).”

That said, the credit union still might not have to comply if you make these loans as an “accommodation.”  Accommodation loans have the following definition:

(f) Accommodation loans. Accommodation loans are conditionally exempt from the requirements of this part. Accommodation loan means a covered loan if at the time that the loan is consummated:

(1) The lender and its affiliates collectively have made 2,500 or fewer covered loans in the current calendar year, and made 2,500 or fewer such covered loans in the preceding calendar year; and

(2)

(i) During the most recent completed tax year in which the lender was in operation, if applicable, the lender and any affiliates that were in operation and used the same tax year derived no more than 10 percent of their receipts from covered loans; or

(ii) If the lender was not in operation in a prior tax year, the lender reasonably anticipates that the lender and any of its affiliates that use the same tax year will derive no more than 10 percent of their receipts from covered loans during the current tax year.

(3) Provided, however, that covered longer-term loans for which all transfers meet the conditions in § 1041.8(a)(1)(ii), and receipts from such loans, are not included for the purpose of determining whether the conditions of paragraphs (f)(1) and (2) of this section have been satisfied.

Does the credit union make more than 2,500 of the non-purchase money balloon RV loans annually?  If not, these loans not considered covered transactions by the regulation.