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Thursday 8 December 2016

Credit unions have their worst year as loan arrears hit €900m

Charlie Weston Personal Finance Editor

Published 30/09/2010 | 05:00

UP to €900m worth of loans given out by credit unions have not had repayments made on them for 10 weeks or more, the League of Credit Unions said yesterday.

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Some 60 credit unions will not be able to pay a dividend (or interest on savings) this year as the movement endures what the league's chief executive, Kieron Brennan, said was its worst year ever.

Mr Brennan yesterday warned that there may be a rise in the number of members unable to repay their loans.

And he cautioned credit unions to act prudently and not to pay a dividend to members unless there was likely to be a strong profit or surplus made this year.

A total of €480m has had to be put aside, as provisions, by the 400 credit unions in the league to cover loans that are unlikely to be repaid.

Loan arrears, where no payment has been made for 10 weeks or more, have jumped in value by 52pc since last year, figures for the first nine months of this year show.

The value of the arrears now stand at €886m in the Republic, but is €939m when Northern Ireland is included. The arrears figure is up from €628m last year, and has doubled from 2008 when arrears were valued at €440m.

The arrears figure represents 15pc of the value of the loans given by league members, up from 10pc last year.

Repayments

Credit unions, which are all run independently, have had to collectively write off loans worth €66m this year. This is up from €51m in June 2009.

They have also been forced to reschedule a large chunk of the €6.1bn total of loans outstanding.

More than one quarter of a €1bn, or €236m, worth of loans were rescheduled. This means the monthly repayments were lowered, or the loan will now be repaid over a longer period. However, Mr Brennan insisted that credit unions have strong levels of reserves and were acting prudently by putting aside funds in case loans were not repaid.

"Even though there has been an increase in the arrears and we are concerned and worried about it, looking at the scale of the provisions and the reserves means it is very manageable.

"They (loans that are in arrears) will not all go bad, and even if they do we will be able to handle it. We are comfortably provided for," he added.

Irish Independent

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