NAFCU President/CEO Dan Berger said in a letter Friday that that the NCUA should continue the current 18% loan rate ceiling.

The issue will be discussed at the NCUA board meeting on Thursday. The 18% ceiling would revert back to 15%, the statutory loan rate ceiling in the Federal Credit Union Act, on March 10 without action from the board. “NAFCU believes that lowering the interest rate will be detrimental to the safety and soundness to credit unions as it could potentially result in a loss of capital,” Berger said in the letter.

“Given that the prevailing interest rates have increased over the last six months, NAFCU believes the NCUA should keep the current 18% rate in effect,” he added.

Berger also said lowering the rate ceiling could discourage federal credit unions from making loans or approving credit card applications for higher risk members.

“This in turn would likely lead to credit unions members seeking loans from other lenders at considerably higher rates,” Berger wrote. According to NAFCU, as of Sept. 30, 316 of the 4,131 federal credit unions in the U.S. had a most common interest rate above 15% for unsecured loans. Therefore, 7.5% of all federal credit unions would be required to change their rate policy if the ceiling were lowered to 15%, Berger said.

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