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As the NCUA Board is set to receive a briefing on federal credit unions’ (FCUs) permissible interest rate ceiling during tomorrow’s meeting, NAFCU President and CEO Dan Berger wrote an open letter to Chairman Todd Harper in American Banker detailing the consequences of the current cap.

While the Federal Credit Union Act sets the interest rate ceiling at 15 percent, it provides the NCUA authority to go above that limit, but only in 18-month increments.

“Since 1987, the NCUA has repeatedly voted to raise and maintain the interest rate ceiling at 18% — acknowledging that not doing so would impair the safety and soundness of individual institutions, while also undermining access to affordable credit for low-income and low-credit-score borrowers,” Berger noted. The NCUA most recently approved extending the 18 percent ceiling at its January board meeting.

NAFCU has long called for the NCUA to adopt a floating interest rate ceiling, or at least increase the cap to 21 percent, to ensure credit unions can effectively lend in challenging interest rate environments and remain competitive.

“I urge you to take a look at the real, clear facts in support of doing so,” Berger wrote, providing data and evidence that show it:

• increases access to credit, including for small businesses and disadvantaged consumers;
• protects consumers by giving them a safe, affordable option through credit unions, rather than having to rely on entities that offer predatory loans;
• strengthens the credit union industry through risk-based pricing.

Read Berger’s full letter to Chairman Harper. NAFCU will monitor tomorrow’s NCUA Board meeting and provide credit unions with insights into the discussion afterward. The association will continue to advocate for policies that empower credit unions to meet the needs of their 135 million members.