NAFCU President/CEO Dan Berger said in a letter Friday that thatthe NCUA should continue the current 18% loan rate ceiling.

The issue will be discussed at the NCUA board meeting on Thursday. The 18% ceiling would revertback to 15%, the statutory loan rate ceiling in the Federal CreditUnion Act, on March 10 without action from the board. “NAFCUbelieves that lowering the interest rate will be detrimental to thesafety and soundness to credit unions as it could potentiallyresult in a loss of capital,” Berger said in the letter.

“Given that the prevailing interest rates have increased overthe last six months, NAFCU believes the NCUA should keep the current 18% rate in effect,” headded.

Berger also said lowering the rate ceiling could discouragefederal credit unions from making loans or approving credit cardapplications for higher risk members.

“This in turn would likely lead to credit unions members seekingloans from other lenders at considerably higher rates,” Bergerwrote. According to NAFCU, as of Sept. 30, 316 of the 4,131 federalcredit unions in the U.S. had a most common interest rate above 15%for unsecured loans. Therefore, 7.5% of all federal credit unionswould be required to change their rate policy if the ceiling werelowered to 15%, Berger said.