The only action item on the agenda for the National Credit Union Administration board’s monthly meeting Thursday was a seemingly simple piece of regulatory housekeeping, reauthorizing the 18% ceiling for loans made by federal credit unions.
The measure, which keeps the rate cap in place through September 10, 2018, passed unanimously – but board member Rick Metsger provided a dose of trenchant commentary before casting his affirmative vote.
The current 18% cap on rates is actually 3% higher than the 15% ceiling provided for in the Federal Credit Union Act. Congress gave NCUA the discretion to adjust the rate as it sees fit, something the agency has been doing regularly for decades, an exasperated Metsger noted.
By law, adjustments must be revisited after 18 months or the rate automatically reverts to the statutory limit. That was NCUA’s task Thursday. Metsger is sick of it.
“I think it’s time to consider asking Congress to set the ceiling higher or to give us the power to set rates for a longer period,” he said, adding passage of time has made the 15% figure “archaic.”
Chairman Mark McWatters said the 18% rate makes it possible for federal credit unions to provide cost-effective products to modest means.
“A reduction in the interest rate cap would directly affect borrowers of modest means, as they are often the members served by credit unions participating in risk-based lending," McWatters said. "It is important that we ensure that credit unions can continue to provide access to affordable credit to best serve their members.”
At the same time, McWatters called Metsger’s proposals “common sense.”
After calling the meeting to order, he looked at his gavel and noted staff had engraved his name on it. “I’m not sure how that fits into the budget,” McWatters said, turning to Metsger. “I could have used yours and saved four dollars.”
