Friday 19 January 2018

Credit unions are 'being held back by lending limits'

The number of loan restrictions on credit unions has increased sharply since the end of 2009
The number of loan restrictions on credit unions has increased sharply since the end of 2009

Gordon Deegan and Charlie Weston

The credit union sector is now overburdened with regulatory restrictions and limitations, which are stifling its growth potential.

That's according to Fianna Fáil finance spokesman Michael McGrath, who was commenting on the news that there are 189 credit unions operating with lending restrictions.

Mr McGrath said: "The sector can only thrive if it is able to issue new loans. In too many instances the ability of credit unions to do just that is being unnecessarily constrained.

"The manner in which legislative changes have been implemented has disadvantaged credit unions and given a competitive advantage to the banking sector."

Five credit unions have been told not to lend any more than €39,999 to an individual; 111 can lend up to €29,999; 50 up to €19,999 and five up to €9,999.

The lending restrictions on the 189 credit unions are down on the 206 loan restrictions that were in place at the start of the year and this compared to 202 at the end of December 2013.

The number of loan restrictions on credit unions has increased sharply since the end of 2009, when there were 66 in place.

Meanwhile, the amount of loans being made by credit unions are at an all-time low.

The movement needs to radically change and attract young people if it is to survive, a conference was told yesterday.

Only half of those under the age of 35 are credit union members, even though they represent a much high proportion of the workforce.

Credit unions are attracting younger people, but they need to do more to be relevant to those born since the 1990s, the Cuna Mutual (Credit Union National Association) conference in Dublin heard.

Cuna is mutually owned and provides insurance and other financial services to credit unions.

Just over half of loans taken by credit union members are under the age of 35. But these 'millennials', who were born in 1980s and 1990s will shortly represent 75pc of workforce, said Cuna chief executive Paul Walsh.

"Currently, over half of all loans in Irish credit unions are to members who were under 35 when they originally joined their credit union, back in the 1970s, 1980s and 1990s.

"They are now targeting the millennials, the new generation of Irish consumers born in the 90s, who grew-up with the internet, connectivity and instantaneous responses to their needs. This generation will represent over 75pc of the Irish workforce by 2025 and are those seeking personal loans for cars, holidays and home improvements," he said.

The percentage of savings of credit unions that are given out in loans has dropped from 54pc to just 34pc last year, the conference heard.

To overcome this, credit unions are modernising their operations in order to attract people aged 18 to 25.

Younger people have been reluctant to join credit unions, said Darren O'Reilly, who was recently appointed as business development manager at the Member First Credit Union in the Artane and Swords areas of Dublin.

"There are 1.3 million people aged between 18 and 34 with unique loan needs, and they have more disposable income as they have less financial pressures," he said.

"Until recently few people of my generation found the credit union a natural fit in their personal finance requirements," Mr O'Reilly said.

Irish Independent

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