Regulation

NCUA to maintain 18 percent CU loan-rate ceiling through 2015

resized_NCUA_SEALThe National Credit Union Administration approved last week the extension of the 18 percent credit union loan rate ceiling through 2015.

The rate ceiling applies to all loans except for those originated under NCUA’s payday alternative loan program, which has a 28 percent rate cap.

NCUA’s extension of the rate ceiling prevents it from falling to the statutory limit of 15 percent after March 10. The National Association of Federal Credit Unions urged NCUA to maintain the 18 percent ceiling, citing rising interest rates.

“NAFCU believes 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,” NCUA said earlier this month. “Further, it could discourage federal credit unions from making loans or approving credit card applications for higher risk members.”

NCUA said interest rate trends justify an extension of the 18 percent cap but “do not justify an increase.”

Additionally, the board said a reduction in the ceiling could hurt the earnings of institutions reliant on 15-to-18 percent loans and that imposition of a ceiling below the market rate would shrink loan volume.

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