Berger urges keeping 18% loan-rate ceiling
Jan. 21, 2014 – Pointing to a rise in prevailing rates in recent months, NAFCU President and CEO Dan Berger on Friday urged keeping the federal credit union loan rate ceiling at 18 percent when the NCUA Board considers action on the cap this Thursday.
The statutory loan rate ceiling is 15 percent under the Federal Credit Union Act. The NCUA Board may raise that ceiling if it determines interest rates have risen over the preceding six-month period and that the prevailing interest rate would threaten the safety and soundness of individual credit unions.
“Given that the prevailing interest rates have increased over the last six months, NAFCU believes the NCUA should keep the current 18 percent rate in effect,” Berger said in his letter Friday.
Short-term rates have risen steadily over the past six months; at 7.5 percent of federal credit unions, the most common rate for unsecured loans is above 15 percent. Berger warned that forcing a reduction in rates could drive some to cease offering certain types of loans.
The NCUA Board last acted on the rate ceiling in July 2012, and the current, 18 percent ceiling expires March 10. Without board action, the ceiling will revert back to 15 percent after that date.
Berger's letter to NCUA Board