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A recent NCUA Letter to Credit Unions (15-FCU-02) gives background information on the NCUA Board's June 18 decision to keep the interest rate ceiling at 18 percent APR for federal credit union loans and 28 percent APR for payday alternative loans.

In her letter, NCUA Chairman Debbie Matz noted that credit unions do not need to make any changes in loan pricing as a result of the board's decision, which extends the current interest rate ceiling on loans through March 10, 2017.NAFCU urged the extension.

Without NCUA Board action, the current rate ceiling would have expired on Sept. 10. The Federal Credit Union Act limits federal credit unions to a 15 percent interest rate ceiling on loans, but the NCUA Board may establish a higher rate after considering certain statutory criteria.

The board's decision also preserves federal credit unions' ability to charge borrowers up to 28 percent APR on payday alternative loans, provided they meet certain terms and conditions: a principal amount of $200 to $1,000, an application fee of no more than $20 and a term of one to six months. Credit unions may make up to three PALs to each member during a six-month period, as long as no PALs overlap or roll over.

Matz said that credit unions may contact NCUA's Office of Examination & Insurance if they believe the rate ceiling is preventing them from granting loans to members.