Q&A: Here’s a question that a Wisconsin credit union recently asked The League’s Legal Affairs team, along with our answer. Do you have a compliance question? Contact The League’s Compliance Hotline at (800) 242-0833 or email.
Q: Our CEO received an NCUA Letter to Credit Unions, “Permissible Loan Interest Rate Ceiling Extended.” Does this apply to our state-chartered credit union?
A: The quick answer is no, the 18% interest rate ceiling for loans only applies to federal credit unions. Wisconsin’s state-chartered credit unions are not subject to this particular NCUA rule —12 CFR 701.21(c)(7). The NCUA letter said:
On January 26, 2023, the NCUA Board voted to continue the temporary 18-percent interest rate ceiling for loans made by federal credit unions, based on the authorities established by the Federal Credit Union Act.
In addition, this January
NCUA press release clearly indicates that the 18% cap applies to federal credit unions:
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.
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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.
Back in 1995, Wisconsin repealed its
general usury limits that applied to credit unions and banks, so no Wisconsin usury limits remain in effect for state-chartered credit unions. But, as we explain in
ii Release No. B026, there are some special situations where Wisconsin credit unions do face interest rate limitations. For example, caps may still apply if you lend to military personnel, in chapter 13 bankruptcies, and Wisconsin Consumer Act loans after maturity, just to name a few.
