Feds will investigate whether credit unions are offering loans that are higher than the interest rates that consumers can actually pay for credit cards.
The bureau of consumer financial protection said Monday it will begin an investigation into credit unions and payday loan companies, as well as other companies that offer the same type of loans to consumers.
Under the Fair Credit Reporting Act, credit unions must offer a “reasonable” range of interest rates for the credit card.
Credit unions are allowed to charge a 3.5% or 6.25% interest rate.
Payday lenders are not allowed to offer interest rates higher than 6.75%.
Under the new rule, a consumer would have to pay at least $50 for a loan to qualify as “unsubstantiated” because it was made to pay a fee, or a higher rate.
Credit unions and other payday lenders have a business model where they make loans to people, usually without any intention of paying back.