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Board Extends Loan Interest Rate Ceiling; Approves Annual Performance Plan

January 2023
Board Extends Loan Interest Rate Ceiling; Approves Annual Performance Plan

Board Action Bulletin

ALEXANDRIA, Va. (Jan. 26, 2023) – The National Credit Union Administration Board held its first open meeting of 2023 and approved two items:

  • An extension of the 18-percent federal credit union loan interest rate ceiling through Sept. 10, 2024; and
  • The agency’s 2023 Annual Performance Plan.

Board Extends Current 18-Percent Interest Rate Ceiling

Consistent with the requirements of the Federal Credit Union Act, the NCUA Board unanimously approved maintaining the current 18-percent interest rate ceiling for loans made by federal credit unions for a new eighteen-month period from March 11, 2023, through September 10, 2024.

“Adjusting the maximum loan rate higher would place additional burdens on credit union member budgets already stressed thin by inflation and tighter credit conditions,” Chairman Todd M. Harper said. “The credit union system’s statutory mission is to support the saving and credit needs of all Americans, especially people of modest means, so that is yet another reason why the maximum interest rate on loans should not be raised at this time. Keeping in place the current maximum interest rate on federal credit union loans for another 18 months is prudent and grounded in sound reasoning.”

The Federal Credit Union Act caps the interest rate on federal credit union loans at 15 percent; however, the NCUA Board has the discretion to raise that limit for 18-month periods if interest-rate levels could threaten safety and soundness of individual credit unions. The 18-percent cap applies to all federal credit union lending, except originations made under NCUA’s payday alternative loan program, which are capped at 28 percent.

An NCUA staff analysis concluded that money market rates have risen over the preceding six-month period and that lowering the rate ceiling below the current 18-percent maximum would threaten the safety and soundness of individual credit unions due to anticipated adverse effects on liquidity, capital, earnings, and growth. The Federal Credit Union Act requires both those conditions to exist for the Board to approve an interest rate ceiling higher than 15 percent.

The staff analysis is available on the NCUA’s public website.

The NCUA Board also agreed to reevaluate the interest rate ceiling at the April Board meeting and to begin exploring the legal and policy issues related to a floating interest rate ceiling.

NCUA’s 2023 Annual Performance Plan Approved

The Board unanimously approved the NCUA’s 2023 Annual Performance Plan, which provides specific direction and guidance toward achieving the mission and the strategic goals and objectives outlined in the agency’s 2022–2026 Strategic Plan.

“This year, the NCUA will pay particular attention to liquidity risk, interest rate risk, and credit risk, as noted in the agency’s recently announced 2023 supervisory priorities,” Chairman Harper said. “And, the agency will once again focus on ever-present cybersecurity threats, not only within credit unions but also within the broader financial system. The implementation of this plan will contribute to our success in addressing these risks.”

The plan also describes the means, strategies, and actions the agency has resourced and plans to undertake to achieve each strategic objective. The Annual Performance Plan was developed simultaneously with the 2023–2024 budget. As part of the budget development process, NCUA offices justified how budget requests would further the purpose of the NCUA’s strategic goals and objectives and identified precise performance indicators that demonstrate the results of these budgetary investments.

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