NAFCU to NCUA: Increase interest rate ceiling
WASHINGTON, DC (June 1, 2018) — National Association of Federally-Insured Credit Unions (NAFCU) President and CEO Dan Berger today sent a letter to the National Credit Union Administration (NCUA) urging the agency to consider the potential benefits of increasing the interest rate ceiling before it expires Sept. 10. Absent an increase, he added, the NCUA should keep the rate at its current 18 percent as well as explore a floating interest rate ceiling.
Berger, in the letter to NCUA Board Chairman J. Mark McWatters and Board Member Rick Metsger wrote that lowering the interest rate “will be detrimental to the safety and soundness of credit unions as it could potentially result in a loss of capital.” He added that a lowered interest rate could also discourage credit unions from “making loans or approving credit card applications for higher risk members.”
He also pointed out the impact on credit unions if the ceiling dropped to 15 percent, which is the cap set by the Federal Credit Union Act: “67.6 percent of all federal credit unions would be required to change their rate policy, which might discourage many of them from making these kinds of loans going forward.”
Berger also encouraged the NCUA to explore options to modify the interest rate ceiling away from a fixed rate to a “15 percent spread over Prime” or “floating” interest rate ceiling. He explained that under this model using today’s rates, “the ceiling would be set at 19.75 percent and it would automatically adjust with the level of Prime.” He added that this approach would also help credit unions reduce their interest rate risk and would “likely lead to an overall increase in lending and expand access to credit.”
For full text of the letter, click here.
The National Association of Federally-Insured Credit Unions is the only national trade association focusing exclusively on federal issues affecting the nation’s federally-insured credit unions. NAFCU membership is direct and provides credit unions with the best in federal advocacy, education and compliance assistance. For more information on NAFCU, go to www.nafcu.org or @NAFCU on Twitter.