As the Deputy is aware, Section 38 1(a) of the Credit Union Act 1997 prescribes that the interest on a Credit Union loan shall not at any time exceed 1% per month. This represents an APR of 12.68%.
In a Credit Union Advisory Committee (CUAC) Policy Paper published in December 2017, the CUAC recommended that credit unions should be permitted to charge an interest rate on loans greater than the present ceiling of 1% per month and proposed that the cap be raised to 2% per month. This change would provide credit unions with greater flexibility to risk price loan products and in so doing may create an opportunity for new product offerings. The CUAC came to this recommendation following a survey of the credit union sector with responses from 117 credit unions.
The CUAC Implementation Group considered this recommendation and agreed in principle to recommend that the Minister raise the interest rate ceiling to 2% per month and for flexibility to be introduced to allow the interest rate to be amended in future by Statutory Instrument following consultation with the Central Bank and CUAC.
Introducing this recommended change to the interest rate cap requires primary legislation to amend section 38 1(a) of the Credit Union Act 1997. I have therefore asked my officials to begin preparations for this legislative change to the interest rate cap which will shortly be brought forward through the normal legislative process, subject to Cabinet approval.