THE Irish League of Credit Unions has accused the Central Bank of failing to act in the interests of distressed mortgage holders.
It claimed regulators were facilitating banks in "bleeding distressed borrowers".
And the representative body for 383 credit unions charged that the Central Bank was more interested in protecting the capital of banks than genuinely helping those in debt distress.
The extraordinary attack came after the league decided not to take part in a new pilot project for dealing with those with multiple debts.
The decision to reject the Central Bank initiative to tackle mortgage arrears comes after months of negotiations between regulators, banks, credit card providers and credit unions.
Priority is to be given to repayment mortgage debt, but credit unions feel they will be the big losers.
A statement from the Irish League of Credit Unions yesterday said that many of the concerns it raised about the new pilot framework were ignored.
The talks failed to reach agreement after the credit union body walked out. That prompted Central Bank official Fiona Muldoon to announce a pilot scheme to be rolled out to 750 troubled borrowers next month. Credit unions feel over-stretched borrowers will now be told to stop making credit union repayments and credit unions will also be forced to write off debts for those in mortgage difficulty.
But banks won't write off mortgage debt, the league said.
"A major flaw with this framework from the outset has been the absence of provision for mortgage write-off or write-down which is an essential element of any plan to give meaningful relief to those in unsustainable debt situations," the league statement said.
It added that credit unions would be willing to participate in a scheme that gives real relief to members in distressed mortgage situations.
But it said it refused to facilitate the banks in "bleeding distressed borrowers who would receive no permanent relief as a result of this framework".
"The framework is clearly written with the intention of protecting the banks' capital positions and maximising their income from mortgage interest payments. It does this very effectively at the long-term expense of the borrower," the statement said.
League chief executive Kieron Brennan said what was needed was burden sharing, including debt writedowns by banks, but he said this was rejected by the banks.
The Central Bank had no comment.