Saturday 3 December 2016

Central Bank 'seven years too late' shutting down Rush Credit Union

Published 23/11/2016 | 02:30

Rush Credit Union: members in loan arrears were given new loans, contrary to the rules. Photo: Mark Condren
Rush Credit Union: members in loan arrears were given new loans, contrary to the rules. Photo: Mark Condren

Central Bank regulators have been criticised for not moving faster to shut Rush Credit Union.

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The lender has now been liquidated after regulators said it repeatedly breached Central Bank instructions and directions as far back as 2009.

The High Court was told this week that the North County Dublin credit union was found to have suffered from the fraudulent misappropriation of funds and that there are suspicions of tax dodging and money laundering.

There are also issues surrounding expense claims, credit cards used for personal expenses and a prevalent use of blank cheques.

As far back as July 2009, the Central Bank ordered the credit union not to issue any loans greater than €20,000.

But a subsequent inspection by staff from the Registrar of Credit Unions in the Central Bank found "instances of non-compliance with the lending restrictions".

A 53-page resolution report presented to the High Court by senior regulator Patrick Casey outlines a string of breaches of instructions over the past seven years.

Numerous inspections were carried out by regulators that found "significant, pervasive and recurring issues in relation to the reserve position, governance, internal control framework and lending practices". Regulators found members in loan arrears were being given new loans, which is contrary to the rules for the local lenders.

Mr Casey states in his deposition that there were issues at Rush Credit Union that it "failed to resolve over many years, despite extensive supervisory engagement with the Registrar of Credit Unions".

Read more: What happened to the 15 cars worth €200,000 meant to be used as draw prizes at Rush Credit Union?

Consumer advocate Brendan Burgess said the Central Bank should have gone to the High Court earlier and used its powers to take over the running of the errant credit union when problems were first identified.

Mr Burgess, who is the founder of Askaboutmoney.com and an accountant, said: "Once a credit union goes bad, the Central Bank should appoint its own team to run it. This could have been closed down naturally by selling the loan book to a neighbour and repaying the depositors.

"Now the liquidator will get huge fees."

Asked if there were other credit unions with severe problems, the Central Bank insisted the scale of the issues in Rush Credit Union were extreme.

It said it did its best to keep the credit union open, when it was asked if it had acted too slowly when it became obvious there were persistent breaches of regulations at the lender.

"The Registry of Credit Unions is committed to exercising its powers to ensure that inadequacies in credit union governance are not tolerated and that member funds are protected at all times," it said.

The Irish League of Credit Unions, which had Rush as a member, insisted the sector was financially strong, having recovered well from the downturn.

Asked whether there could be more out there like Rush, a spokeswoman said the appointment of a liquidator to a credit union was extremely rare and regrettable.

Fears of panic and contagion triggered end of troubled union

Central Bank regulators feared they had to act fast to shut down Rush Credit  Union once news of its problems emerged.

They were concerned about a disorderly collapse that would lead to a "contagion" that could be damaging to the sector.

Probes into the troubled credit union uncovered what was described in court documents as substantial levels of possible misappropriation of funds. This was reported in the Irish Independent on June 2. Despite this, regulators were concerned Rush members were in the dark about the full extent of the problems and might panic if action was not taken fast.

Irish Independent

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