CUNA & NAFCU Warn of 'Seismic' Impact to CUs From Proposed Legislation

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Lawmakers on the Senate Banking, Housing and Urban Affairs Committee discussed a proposal on Thursday to adopt a 36% “all-in” interest rate cap to apply to all credit union members. Currently, this cap only applies to military members. CUNA and NAFCU attempted to explain to committee members just how significant and “seismic” a move like this would be for the entire credit union industry.

In a letter from both organizations to the Committee, they stated, “Adoption of a 36% all-in cap will essentially require lenders to offer larger, longer duration loans because these loans are ‘easier’ to fit under the cap precisely due to their increased size and duration.” The letter continued, “This effectively encourages borrowers to take on more debt or, for many borrowers with lower creditworthiness, push them out of the market for small dollar credit altogether.”