Berger to NCUA Board: A variable interest rate expands possibilities for CUs

by NAFCU Newsroom

In response to the NCUA’s decision to extend the 18 percent loan interest rate ceiling until Sept. 10, 2021, NAFCU President and CEO Dan Berger urged NCUA Board Chairman Rodney Hood and board members Todd Harper and Mark McWatters to explore the adoption of a variable interest rate, and encouraged the board to publish an advanced notice of proposed rulemaking (ANPR). An ANPR for the rate ceiling is listed on the NCUA’s Fall Rulemaking agenda.

The board agreed to extend the loan interest rate ceiling during its January board meeting, the current rate was set to expire March 11, 2020, and would have reverted to 15 percent without board action.

“A variable interest rate allows credit unions to adequately utilize risk-based pricing, helping to mitigate interest rate risk and credit risk,” wrote Berger in a letter sent Thursday. “A variable interest rate with a fixed spread over Prime would still be below the interest rates often charged by banks.”

In the letter, Berger specifically suggests the adoption of a 15 percent spread over Prime.

 

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