NCUA to Solicit Comments on Interest Rate Adjustment

In the coming months, the NCUA will solicit comments on a proposal to adjust the 18% interest rate cap on most loans by credit unions, according to the agency’s regulatory agenda published this week.

The board, according to the agenda, will issue an advanced notice of proposed rulemaking seeking comment on the impact the statutory interest rate ceiling has and the methodologies the board might use to set up a temporary rate ceiling for federal credit unions, including a variable or floating rate.

Federal law sets the interest rate cap at 15%, but the NCUA board may temporarily increase it above the cap for 18 months. The board has maintained an 18% cap since 1987, extending it every 18 months.

The advanced notice of proposed rulemaking indicates that the agency wants to solicit comments before even releasing a proposed rule.

Credit union trade groups have been pushing for interest rate adjustments.

“While it is critical that the Board at least maintain the current cap of 18%, we ask the Board to examine the potential benefits associated with a floating interest rate cap, such as the enhanced ability of FCUs to manage interest rate risk,” Luke Martone, CUNA’s senior director of advocacy and counsel, wrote in a letter to the NCUA board on Wednesday.

“A variable interest rate would lead to expanded access to credit and effectively mitigate interest rate and default risk by allowing tailored risk-based pricing,” Kaley Schafer, NAFCU’s regulatory affairs counsel said in a letter to the agency last year.

The regulatory agenda indicates that the agency is continuing to review comments submitted on alternative capital and additional options that could be offered as part of the NCUA Payday Alternative Loan Program.