The NCUA board on Thursday approved a staff recommendation to maintain the 18% interest rate ceiling for most loans made by federal credit unions.
Voting unanimously, the two-member board agreed that lowering the ceiling would place credit unions at a competitive disadvantage and could impact the safety and soundness of credit unions.
Loans made under the NCUA’s Payday Lending Alternative program will remain capped at 28%.
Federal law sets the interest rate cap at 15%, but allows the NCUA board to adjust the cap every 18 months. The current interest rate cap has been in effect since 1987.
Board member Rick Metsger pointed out that the board has increased the cap every 18 months for the past 40 years.
He added that the board should consider asking Congress to increase the statutory cap or to give the agency the power to increase the rate for longer periods of time.
Acting board chairman J. Mark McWatters agreed with Metsger’s analysis.
Rendell Jones, the agency’s chief financial officer, told the board that at the end of 2016, the share insurance fund balance stood at $12.6 billion
He said that the number of troubled credit unions decreased to 196 at the end of the year, compared with 220 at the end of 2015.
He told the board that 14 credit unions were the subject of involuntary liquidations or assisted mergers, compared with 16 in 2015. Fraud was a contributing factor in 10 of those liquidations or assisted mergers.
