How QCash made CFPB lending regulations credit union friendly

If you work for a financial institution and have concerns about both the public perceptions of payday lending and the CFPB lending regulations – this article is for you.

Although the CFPB or Consumer Financial Protection Bureau is in a state of flux now, just a few years ago the bureau was writing new payday CFPB lending regulations that had the potential to prevent credit unions from meeting their members’ small-dollar lending needs.

I personally wanted to get involved with the CFPB, because in my experience, if you have a seat at the table with the decision makers, you can be persuasive about your position and help influence regulation. At the end of the day, the regulation is going to happen. You have to be there if you want to influence its direction. That’s why I joined the CFPB’s Advisory Council, even though the bureau – any federal agency, really – didn’t have a reputation for being innovators. In fact, they had a reputation for writing regulations that prevented financial institutions, even good players like credit unions, from serving members the way they would like to.

Richard Cordray, who was CFPB director at the time, is a relatively open-minded person, and is also very technologically astute. Thanks to those qualities, payday lending regulation outcome turned out better for QCash and our product than I ever imagined.

The current regulatory framework supports regulators who believe technology can help solve consumer protection problems, if used effectively. The CFPB lending regulation is very open to technology, but they want it applied within certain constraints. If you can design a path forward, they are willing to work with you.

That’s what we tried to do with the CFPB and QCash.

CFPB Lending RegulationWhile I participated in the CFPB’s Advisory Council, we talked about a lot of different things. But when we began talking about Qcash, I found it was really important to educate the CFPB not only with inspirational stories but also with data.

QCash’s digital lending platform made it easy.  Our members love QCash and are happy to share endless stories about the positive impact we’ve had on their lives. And, we can pull data out of the QCash digital lending platform to back up and quantify those stories.

It isn’t about making a buck off the member, but instead about the impact small dollar lending has on our members’ day-to-day lives. Small dollar lending is core to the mission and purpose of a credit union. QCash just lets us do that digitally, in a modern world with a modern cost structure.

As the CFPB began to write new rules for payday lending, I was sitting at the table and they asked me questions. I told them inspirational stories and also provided data. Through our involvement, we were able to create an environment in which they adopted a rule that is consistent with the QCash program.

Part of that was because we were convincing in making our case. Our influence is apparent in the fee they allowed financial institutions to charge, the exclusion of the 36% rule, the exclusion certain term lengths that perpetuate predatory lending structures … those were all things we advocated for, and the CFPB lending regulation group listened.

At the end of the day, because we were a part of the council, we were able to influence the CFPB’s regulatory framework. We created a huge lane for credit unions on the payday lending highway, and QCash is proudly driving down that lane, helping members along the way.

The rule gave credit unions and other financial institutions and advantage, and put payday lenders at a disadvantage. That sounds like a happy ending to the story, doesn’t it? Well, we’re not stopping there. We’re actually working with payday lenders to see if they can use our QCash product to continue to make short-term, small dollar loans that actually help consumers.

The CFPB lending regulation team wrote thoughtful regulation that didn’t completely eliminate small dollar lending. With our technology, our tools, the data analytics and mobile cloud technology, QCash can to provide great margins for institutions, and a great deal for members.

April 17, 2018

By Kevin Foster-Keddie, CEO of WSECU

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