Nevada Federal had been offering a loan called AdvancePay, which charged an application fee up front.
After receiving this letter from the National Credit Union Administration (NCUA) chairman, Michael Fryzel; Nevada Federal decided to stop offering their payday alternative product, even though they believed the product was cheaper than other alternatives.
What I think happened is that the NCUA considers the application fee part of the finance charge. This makes their loan product above the 18% max APR ceiling allowable by an Federal Credit Union Act (FCUA).
So why does the NCUA think that an application fee that is charged, regardless, of whether or not a loan is provided considered part of a finance charge?
