Berger urges NCUA to increase interest rate ceiling, consider floating rate

by NAFCU Newsroom

NAFCU President and CEO Dan Berger encouraged the NCUA Board 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 a letter to NCUA Board Chairman J. Mark McWatters and Board Member Rick Metsger yesterday, 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.”

The NAFCU president reminded the NCUA Board that the agency has flexibility in establishing the interest ceiling on loans. The Federal Credit Union Act sets a cap of 15 percent but permits NCUA’s board to make adjustments based on certain criteria. “[T]he NCUA Board may increase the rate – or in the alternative, maintain the rate above 15 percent – 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,” Berger wrote.

 

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