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NCUA Board Votes to Maintain 18% Interest Rate Ceiling on Most Loans

By Ronald K. Vaske, Kaley Schafer & Loran Kilson on

The NCUA board on July 18 voted to maintain its interest rate ceiling on most loans at 18% from Sept. 11, 2024 through March 10, 2026.

The only exception to that rate cap is loans modeled after the agency’s Payday Alternative Loan program; the interest rate on those loans will remain capped at 28%.

“Lowering the rate ceiling below the current temporary 18% maximum would threaten the safety and soundness of individual credit unions due to the anticipated adverse effect upon liquidity, capital, earnings, and growth,” agency staff told the board, in a memo.

The Federal Credit Union Act limits the interest rate that credit unions may charge on loans to 15%. However, that cap may be set higher if the NCUA consults with Congress, the Treasury Department and the appropriate congressional committees. The law sets two other conditions that must be met before the interest rate may be increased: money market interest rates must have risen over the preceding six-month period and the prevailing interest rate levels must threaten the safety and soundness of individual credit unions as evidenced by adverse trends in liquidity, capital, earnings, and growth.

“In the current rate environment, an 18-percent interest rate ceiling provides federal credit unions with sufficient ability to manage liquidity, capital, earnings, and growth, protects member access to safe and affordable credit, and does not require federal credit unions to incur any additional workload or costs associated with a change to the rate ceiling,” the agency staff said, in the memo.

The NCUA board last voted to set the ceiling at 18% effective from March 11, 2023, to September 10, 2024. In December, 1980, the NCUA board voted to increase the loan interest rate ceiling to 21%. In May, 1987, the board reduced the cap to 18% and has voted 23 times to maintain that cap.

This development is not only important to federal credit unions, but it is also important to state-chartered credit unions, banks and other lenders whose states contain statutes giving those entities usury parity with federal credit unions 

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