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Permissible Interest Rate Ceiling

12-FCU-04 / August 2012
Permissible Interest Rate Ceiling
All Federal Credit Unions
Consumer Lending
All Federal Credit Unions
Permissible Interest Rate Ceiling

Dear Board of Directors and Chief Executive Officer:

This letter highlights the NCUA Board’s decision to continue the current 18 percent interest rate ceiling for loans made by federal credit unions.

We approved the 18 percent rate at the July 24, 2012 open meeting.

Why did NCUA renew the interest rate ceiling?

The Federal Credit Union Act limits federal credit unions to a 15 percent interest rate ceiling on loans, unless the NCUA Board establishes a higher rate after considering certain statutory criteria.1  We must reconsider an approved rate over 15 percent at least every 18 months.

The current established 18 percent rate ceiling expires on September 10, 2012. Our decision extends the 18 percent ceiling for 18 months beginning September 11, 2012 through March 10, 2014.

We may reconsider the established ceiling any time during the 18-month extension if market conditions change.

What is the effect on NCUA’s Short-Term Small Loan Program?

Our decision preserves your federal credit union’s ability to offer a payday loan alternative at a rate of 28 percent under NCUA’s Short-Term Small Loan Program.2

NCUA designed the Short-Term Small Loan Program to provide flexibility to federal credit unions in providing alternatives to payday loans. The program allows you to serve members who are seeking this type of loan.

You may charge your members up to 28 percent on short-term small loans under conditions specified in NCUA’s regulations.3

If you have any questions, please do not hesitate to contact your NCUA regional office.



Debbie Matz


2Amendments to part 701 permit federal credit unions to charge up to 28 percent for payday alternative loans meeting the Short-Term Small Loan Program criteria.  The Short-Term Small Loan Program rate is set 1,000 basis points above the ceiling established by the NCUA Board for all other federal credit union loans.
3The rule is available on the NCUA website at the following address: (You will be leaving and accessing a non-NCUA website. We encourage you to read the NCUA's exit link policies. (opens new page).)

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