ALEXANDRIA, Va.― The NCUA board has approved the continuation of a temporary 18% interest rate ceiling for loans made by federal credit unions, extending the temporary interest rate ceiling to Sept. 10, 2027.
As the agency noted, the Federal Credit Union Act generally limits federal credit unions to a 15% interest rate ceiling on loans, but the board has the option to establish a temporary, higher rate for up to 18 months if it determines that money market interest rates have risen over the preceding six-month period and that the prevailing interest rate levels threaten the safety and soundness of individual credit unions.
While the interest rate ceiling increase is referred to as “temporary,” it was first adjusted to 18% in May of 1987, after having been raised to 21% in 1980. It has been renewed 21 times since 1987.
Staff Analysis
NCUA said staff analysis determined the statutory criteria have been met for the NCUA board to establish an interest rate ceiling exceeding 15%.
Details of the staff analysis are available online.
A related letter to credit unions can be found here.
DCUC Responds
“The Defense Credit Union Council thanks the NCUA Board for its decision to extend the temporary 18-percent loan interest rate ceiling for federal credit unions through September 10, 2027,” said DCUC Chief Advocacy Officer Jason Stverak in a statement. “This action reflects a clear understanding of today’s interest-rate environment and the importance of preserving credit unions’ ability to safely and responsibly meet the credit needs of their members—particularly servicemembers, veterans, and military families who often rely on affordable access to short-term and emergency credit.
“As we outlined in the letter DCUC submitted to the Board yesterday, most credit unions price loans well below the 18% ceiling. However, retaining this flexibility is critical to ensuring credit unions can continue serving higher-risk and underserved borrowers without compromising safety and soundness or pushing members toward far more expensive non-bank alternatives.
“We appreciate the board’s careful review of market conditions and its continued commitment to a regulatory framework that balances prudential oversight with the operational flexibility credit unions need to fulfill their mission,” Stverak contiinued. “DCUC looks forward to continuing our constructive engagement with the NCUA on policies that strengthen the credit union system and protect the members we collectively serve.”
America’s CUs Responds
“Maintaining the NCUA’s 18% interest rate ceiling is about preserving access to responsible, affordable credit for consumers. As a result, credit unions are able to serve borrowers who would otherwise be pushed into far more expensive and less regulated alternatives,” said America’s Credit Unions President and CEO Scott Simpson. “The NCUA has maintained this ceiling for decades, recognizing that allowing the cap to revert back to 15% would not lower costs for consumers. Rather, it would restrict access to credit, particularly for working families who rely on credit unions for safe, fairly priced loans. The NCUA’s authority to maintain the 18% ceiling provides stability, protects consumers, and ensures credit unions can continue fulfilling their mission as financial cooperatives that serve people, not profits.”
