Credit Union Trades Call on NCUA to Raise Loan Interest Rate Cap

Credit union advocacy groups CUNA and NAFCU are both calling on the NCUA to raise the loan interest rate cap. Learn why.

David Baumann


Jan 23



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David Baumann

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David Baumann

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CUNA and NAFCU push for higher rates to align with current economic climate.

Credit Union trade groups are urging the NCUA to increase its loan interest rate cap when the agency’s board meets Thursday.

“Maintaining relatively low loan rates in the face of market interest rate increases can lead to higher loan losses and safety and soundness concerns,” Luke Martone, CUNA’s senior director of advocacy, told the agency in a letter last week. “The alternative, avoiding the risk by turning applicants away, means some consumers are forced to shop for credit at alternative services providers with substantially higher loan rates.”


Federal law caps credit union loan interest rates at 15%. However, that rate can be raised for 18-month periods if the low rate would threaten safety and soundness issues at credit unions.

For more than 30 years, the cap has stood at 18%, a rate that was once again renewed by the agency board in June of 2021. The board exempted loans modeled after the NCUA’s Payday Alternative Loan (PAL) Program from the cap. For those loans, the maximum rate is 28%.

Inside the CUNA Letter

In his letter, Martone suggested that the cap for non-PAL loans be increased to 21%, which was the cap between December 1980 and May 1987. For instance, he said, a higher interest rate cap would help consumers who otherwise would have to rely on finance companies—with even higher interest rates—to purchase vehicles.

Martone added the board could consider adopting a floating interest rate cap of the prime rate plus 15%, with a minimum of 20% and a maximum of 30%.

NAFCU Stance

In May, NAFCU also encouraged the NCUA board to adopt a floating rate equal to a 15% spread over prime.

“NAFCU urges the National Credit Union Administration board to immediately raise the permissible interest rate ceiling to mitigate unnecessary interest rate risks posed to federal credit unions during this critical period of economic recovery and to enable all federal credit unions to more confidently endeavor to serve the underserved and unserved in their communities,” wrote Ann Petros, the organization’s vice president of regulatory affairs.

NAFCU suggested that if the agency did not find that rate acceptable, the board at least should maintain the 18% cap.

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