ARLINGTON, Va.–NASCUS has expressed strong support for an NCUA proposal that would allow credit unions to capitalize interest.
The trade group representing state regulators called on the agency to finalize the proposal “expeditiously.”
“We have no doubt credit unions will exercise the ability to capitalize interest to the benefit of members in need and are confident in the ability of state examiners to provide supervisory oversight of loan workouts and modifications,” NASCUS wrote in a comment letter to NCUA.
NASCUS noted it agreed with NCUA when it proposed the rule in November 2020 that removing the prohibition on capitalization of interest by federally insured credit unions would provide credit unions’ greater flexibility to work with economically distressed members. “That enhanced flexibility benefits distressed credit union borrowers by expanding the options for repayment programs as the member regains their economic footing,” NASCUS stated. “Concurrently, provisions of the rule protecting the best interests of the borrower provide consumer protection guardrails that protect against the unlikely chance that a credit union engages in unfair lending practices.”
One Recommendation Offered
NASCUS did offer one recommendation: that the agency reconsider the blanket prohibition contained in the proposal against additional advances to cover credit union fees and provide credit unions the full range of options for managing and structuring loan work outs as other depository institutions.
The full NASCUS comment letter can be found here.