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Seek a second opinion when credit is refused

In his Budget speech, Minister Noonan highlighted the fact that credit is the lifeblood of the economy and without adequate credit availability, businesses will find it difficult to maintain the jobs they have, let alone grow and create more.

He referred to the ambitious small and medium enterprise (SME) lending targets which the Government had set the two pillar banks, AIB and Bank of Ireland, of €3bn each last year, €3.5bn each this year and €4bn each in 2013.

But what should you do if your credit application has been turned down?

The Credit Review Office (CRO) was established in March 2010 and the enabling legislation is Section 210(1)(b) of the NAMA Act 2009.

Who can apply?

SMEs which include farm enterprises may apply for a review of a decision by a participating institution to refuse, reduce (such as bank overdrafts) or withdraw credit facilities, for amounts from €1,000 up to €500,000.

Each review will only apply to a specific declined credit application up to €500,000 and not to any other borrowings which may exist. Therefore, farmers who may have total borrowings above this limit are not excluded from the review process.

A farmer may also apply where the bank has not responded with a decision on an application for review within 15 working days or where the farmer considers that the terms and conditions attached to a credit facility or its price are too onerous to accept.

Where a farmer considers that the terms and conditions attached to a credit facility are so onerous as to amount to a constructive refusal, he/ she is entitled to apply for a review. Examples of onerous terms and conditions would include:

-Where the proposed rate for an approved credit request is unreasonably high taking account of risk factors or;

-The bank has requested an unreasonable amount of security to cover the lending, taking account of risk factors and the valuation of the security.

However, the farmer must appeal the initial refusal through the bank's own internal appeals process first and if he/she is unsuccessful he/she may appeal to the CRO.

At present, the participating banks are those engaged with NAMA:

-Allied Irish Banks;

-Bank of Ireland;

-Irish Bank Resolution Corporation Limited (formerly Anglo Irish Bank and Irish Nationwide Building Society);


Ulster Bank has implemented its own internal credit appeals system for its clients, which, although not forming part of the CRO procedures, allows for an internal review of rejected applications for credit.

What is the process?

The review process must be initiated by the farmer who has had a credit request declined or reduced and who meets the criteria outlined above. The following are the steps to take:

-Complete the CRO application form available on its website ( or phone 1850 211 789 for an application form and return the completed form to the CRO. Details of the farmer's business, arguments supporting the loan application and anything tending towards showing the future viability of the farm are among the information sought on the application form;

-The CRO will contact you to confirm eligibility (the fee payable is usually €100-€250) and send you a brief legal agreement to sign (to allow the CRO to access inform- ation which is contractually confidential between you and the bank);

They will also arrange an internal bank review of your application if you have not already done so;

-You return the processing fee and signed legal agreement to the CRO and then they send a confirmation and case number;

-The CRO will then confirm the lending facts and asks the bank for reasons your borrowing request was declined. The bank's response will be copied to you and you may comment;

-The facts and opinions will then be assessed by a credit underwriter who will independently and impartially review the submissions from both parties on whether the lending can be safely repaid;

-You will receive a letter from the CRO confirming the outcome of the assessment with the bank's proposed actions.

Is there a time limit to appeal?

Yes, the farmer's application form must be submitted to the CRO within 28 days of the bank's internal decision to decline or reduce facilities. However, if you have been refused more than 28 days ago, the CRO can ask the bank to carry out a review which they normally agree to do, provided the information is current.

If the information is not current, you can formally request that the application process begins again by re-submitting your original request for approval updated with current information. This will re-date the application to make it eligible for the CRO assessment.

Is the opinion of the CRO binding on the bank?

No. However, in practice, where the CRO has suggested the lending should be made, to date the banks have generally respected its opinion and complied.

How long will the process take?

The CRO has stated that anticipated maximum timescales are as follows:

-Turnaround times for the initial credit and appeal decisions in the banks are an internal policy matter for the banks. The Code of Practice for Business Lending requires the bank to tell the borrower how long it is likely to take before a decision is taken on an application;

-Application form requesting an opinion from CRO must be submitted within 28 days of the bank's internal appeal decision to decline or reduce facilities;

-The bank's turnaround of request from the CRO for completion of the bank form must be within 15 working days. Any period longer than this will be considered a constructive refusal by the bank.

-The CRO will assemble the application and have it reviewed within 10 working days;

-The bank will comply with or explain the decision not to lend on any CRO opinion sent to them within five working days.

I asked my bank manager about a loan but he told me not to bother.

Can the CRO help?

Yes, but first you must submit a formal written request for lending to your bank manager for formal review and go through the process as detailed above.

It has been reported that the CRO has had 102 applications for review since they were set up in April 2010; with 55pc of cases having been successful. Given those statistics, one must question what a farmer has to lose in making an application following an adverse credit decision once the initial credit application seemed reasonable.

Disclaimer: The information in this article is intended as a general guide only. While every care is taken to ensure accuracy of information contained in this article, solicitor, tax consultant and Nuffield scholar Aisling Meehan does not accept responsibility for errors or omissions howsoever arising. Tel: 061 368 412

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