Removing Barriers Blog

CUNA Supports Proposal to Allow Capitalization of Interest
Posted January 26, 2021 by CUNA Advocacy

Today, we filed a comment letter in support of the NCUA’s proposed rulemaking on Capitalization of Interest in Connection with Loan Workouts and Modifications. Since 2012, credit unions have expressly been prohibited from capitalizing interest.

We support the proposal to allow for the capitalization of interest, which would provide a more consumer-friendly option where none currently exists. We expect credit unions will likely utilize this tool as a way to help struggling borrowers.

Further, the proposal would establish that, at a minimum, if a credit union’s loan modification policy permits capitalization of unpaid interest, the policy must require certain consumer protection guardrails, such as including documentation regarding the borrower’s ability to repay. We believe these guardrails are reasonable.

Lastly, we ask the NCUA to adopt the proposed rule in order to provide parity between credit unions and banks, which are not subject to the same prohibition on capitalizing interest.