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NCUA Chairman Todd M. Harper Statement on the Federal Credit Union Loan Interest Rate Ceiling

June 2021
NCUA Chairman Todd M. Harper Statement on the Federal Credit Union Loan Interest Rate Ceiling
Todd M. Harper

NCUA Chairman Todd M. Harper

As Prepared for Delivery on June 24, 2021

Thank you, John and Justin, for your efforts to bring the temporary interest rate ceiling for federal credit unions before the NCUA Board for consideration. Our actions today will provide certainty to federal credit unions that the current 18 percent maximum loan interest rate will continue until 2023.

The Federal Credit Union Act requires the NCUA Board to take action before September 11, 2021, to change or reaffirm the current temporary maximum loan rate of 18 percent — 28 percent for Payday Alternative Loans — or the maximum loan rate will revert to the lower statutory level of 15 percent, including PALs. With today’s action, the Board will authorize a temporary 18 percent maximum loan interest rate for federal credit unions, effective September 11, 2021, through March 10, 2023.

Before reaching this decision, staff conducted an analysis of recent market and financial conditions. That analysis concludes that money market rates have risen over the preceding six-month period. It also finds lowering the interest rate ceiling below the current temporary 18 percent maximum would threaten the safety and soundness of individual credit unions due to the anticipated adverse effect upon liquidity, capital, earnings. and growth.

Going forward, I encourage all credit unions to offer their members lower rates whenever possible and to develop affordable loan products that include a savings feature. Providing members with an easy way to save for a rainy day will help them weather small emergencies that might otherwise have caused them to go to a payday lender.

In fact, in my conversations with credit unions prior to and during the COVID-19 pandemic, I learned of several credit unions making short-term loans that include a savings feature or that carry an interest rate as low as 5 percent. During the initial days of the pandemic, some credit unions even offered these low-dollar loans with no interest for 90 days. These innovative and affordable products underscore the mission of the credit union system to provide financial services to everyone, including those of modest means.

Thank you again, John and Justin, for your work on this matter. That concludes my remarks. I now recognize Vice Chairman Hauptman.

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