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The National Credit Union Administration board voted to extend the 18% interest rate ceiling for loans made by federal credit unions through Sept. 10, 2024.
Background: The Federal Credit Union Act caps the interest rate on federal credit union loans at 15%, but the NCUA board has the discretion to raise that limit for 18-month periods if interest-rate levels could threaten safety and soundness of individual credit unions.
Treasury Letter: The Treasury Department last week told the NCUA that it does not see any compelling reason to raise the rate ceiling beyond 18%. In a letter to the NCUA board, Treasury said Congress established the rate ceiling due to credit unions’ nonprofit structure and that banks are charging an estimated average APR of just over 13% on non-reward credit cards.
Credit Union Advocacy: The Credit Union National Association and National Association of National Association of Federally-Insured Credit Unions have urged the NCUA to raise the rate ceiling or adopt a floating rate cap amid market interest rate increases. During the NCUA board meeting, Harper echoed Treasury’s statement that there is no compelling reason to raise the ceiling.
Grassroots: Community bankers can continue urging Congress to hold hearings on the credit union tax exemption using a customizable message to lawmakers on ICBA’s Wake Up page.