Pointing to states, NCUA Board looking
for new way to set interest rate ceiling

Feb. 23, 2017 -- Re-establishment of the federal credit union interest rate ceiling 18% was approved for the next 18 months by the NCUA Board at its meeting today, but only after the board’s two members agreed that the time may be come to consider a new way to set the rate – pointing to states as a model.

NCUA Board Acting Chairman J. Mark McWatters and Board Member Rick Metsger approved the new interest rate ceiling, but after Metsger remarked that the board has been considering, and setting, the ceiling in the same way for the past 40 years. “Raising the cap for 40 straight years indicates that there is good reason to look at something different going forward,” the NCUA Board Member said. As an example, he pointed to the results of a recent NASCUS survey of state regulators indicating that at least 15 states have no interest rate ceiling at all, and that a number of the other states with ceilings have adopted other ways of dealing with it – including with variable rates. McWatters said he concurred with Metsger’s view.

In a statement issued after the board meeting, McWatters said that reducing the interest rate ceiling would directly affect modest-means borrowers, who he said are often the credit union members participating in risk-based lending. “It is important that we ensure that credit unions can continue to provide access to affordable credit to best serve their members,” he said.

In other action, the board heard report on the National Credit Union Share Insurance Fund, which showed that fund ended 2016 with a 1.24 percent equity ratio. Following replenishment by credit unions of their 1% deposits kept with the fund, Chief Financial Officer Rendell Jones said, the fund equity would increase to 1.27%. He said no dividend is expected in 2017.

NCUA Board Action Bulletin; Feb. 23, ‘17