Texas Administrative Code › Title 7 - BANKING AND SECURITIES › Part 6 - CREDIT UNION DEPARTMENT › Chapter 91 - CHARTERING, OPERATIONS, MERGERS, LIQUIDATIONS › Subchapter G - LENDING POWERS › Section 91.720 - Small-Dollar, Short-Term Credit

Current through Reg. 49, No. 28; July 12, 2024
(a)
				  General. Credit unions are encouraged to offer small-dollar credit products
				  that are affordable, yet safe and sound, and consistent with applicable laws.
				  The goal in offering these small-dollar credit products should be to help
				  members avoid, or transition away from, reliance on high-cost debt. To
				  accomplish this goal, credit unions should offer products with reasonable
				  interest rates, low fees, and payments that reduce the principal balance of the
				  loan or extension of credit.
(b)
				  Definition. For purposes of this section, small-dollar, short term credit
				  product is defined as a low denomination loan or extension of credit having a
				  term of 12 months or less, where the amount financed does not exceed $2,000 .
				  Each credit union is responsible for establishing appropriate dollar limits and
				  terms based upon its size and sophistication of operations, and its net
				  worth.
(c) Limitation.
				  Accessibility and expediency are important factors for many members with
				  emergency or other short-term needs. Therefore, small-dollar credit products
				  must balance the need for quick availability of funds with the fundamentals of
				  responsible lending. Sound underwriting criteria should focus on a member's
				  history with the credit union and ability to repay a loan within an acceptable
				  timeframe. Given the small dollar amounts of each individual credit request,
				  documenting the member's ability to repay can be streamlined and may need to
				  include only basic information, such as proof of recurring income. The
				  aggregate total of streamlined underwritten small-dollar credit products
				  outstanding, however, shall not exceed 20% of the credit union's net
				  worth.
(d) Fees. A credit union may
				  require a member to pay reasonable expenses and fees incurred in connection
				  with making or closing a loan. With respect to expenses and fees being assessed
				  on small-dollar, short-term credit products, the expenses and fees are presumed
				  to be reasonable if the aggregate total is $20 or less. In addition, if the
				  credit union refinances a small-dollar, short-term credit product, it may
				  charge such expenses and fees only once in a 180-day period. Credit unions may
				  also charge a late fee as permitted by Finance Code §
										RSA
				  124.153.
(e) Payments. Credit unions should structure
				  payment programs in a manner that reduces the principal owed. For closed-end
				  products, loans should be structured to provide for affordable and amortizing
				  payments. Lines of credit should require minimum payments that pay off
				  principal. Excessive renewals or the prolonged failure to reduce the
				  outstanding balance are signs that the product is not meeting the member's
				  credit needs and will be considered an unsound practice.
(f) Required Savings. Credit unions may
				  structure small-dollar credit programs to include a savings component. The
				  funds in this account may also serve as a pledge against the loan or extension
				  of credit.