Frustrated savers are turning their backs on banks
CREDIT unions are seeing a surge in people becoming members and dormant account members reactivating their accounts in response to banks closing their doors to customers.
People are turning up in credit unions with bundles of cash, having closed their bank accounts in frustration at banks' unwillingness to lend, the Irish Independent has learned.
Credit unions are in the opposite position to banks in that they have excess funds to lend, while banks are hoarding funds in a bid to rebuild balance sheets damaged by developer loans that have gone bad.
Chief executive of the Irish League of Credit Unions Kieran Brennan said that people were closing bank accounts and coming into credit unions with bags of money.
People were reacting to the fact that banks were unwilling to lend to them despite these people having a good track record with their bank, sometimes going back 30 years.
Credit unions were still underlent, with the average loans-to-assets ratio at 51.2pc compared with a target of 70pc.
"The reality is that credit unions are open for business and are willing to lend even in these difficult times."
Many people were turning to credit unions who were in extreme financial difficulties, he said. This was causing people to seek to have loans rescheduled.
Other people were reactivating accounts in case they needed access to loan facilities in the coming months.
"These people were saying to us 'we have learned a lesson from turning our back on the credit union and we may need a loan in six months' time'," Mr Brennan said.
Loans across the 2.9 million-member organisation were up by 6.7pc to €7.1bn in the year to last September, he added.
Savings levels had grown slightly to €11.9bn despite average dividends (roughly equivalent to the interest rate paid on a deposit account in a bank or building society) being just 2pc in credit unions.
One credit union which has seen a surge in new members is Knocklyon, the south Dublin suburban area regarded as historically comfortable.
Manager Jim Colclough said savings had grown by 9pc last year when compared with the previous year, while loans advanced grew by 10pc.
Twice the number of people were applying for membership in the first month of this year compared with the average number joining per month last year, he added. Knocklyon is regarded as a middle-class area with little public housing and a mainly young population.
Mr Colclough said: "The upward trend in numbers joining is a reversal of the trend of the last few years."
He said all applicants were being checked out to ensure that they were not just joining to get a loan they could not afford to repay after being refused funding from the banks.
- Charlie Weston
