Tuesday 20 March 2018

Public 'being pushed to moneylenders' in credit union squeeze

Credit Union
Credit Union
Charlie Weston

Charlie Weston

THE Central Bank has been called on to relax lending restrictions it has imposed on the majority of credit unions.

New figures show that six out of 10 credit unions have been ordered by the registrar of credit unions, which is part of the Central Bank, to put a limit on the size of loans they can hand out.

The Irish League of Credit Unions, which represents most credit unions, said the restrictions were "unduly broad" and were pushing consumers into the hands of moneylenders.

Dail questions asked by Fianna Fail's Michael McGrath show that many credit unions have had limits on loans imposed on them by the regulator.

"Currently, about 59pc of all credit unions are subject to lending restrictions," Finance Minister Michael Noonan told Mr McGrath.

There are 387 credit unions in the country, according to the body charged with helping them to merge, Rebo. This means that around 228 have some form of restriction imposed on the amount of lending they can do.

Limits were needed because of regulatory concerns about the operation of the credit unions impacted and a risk to member savings, Mr Noonan said.

"The number of lending restrictions is a reflection of concerns about lending practices in the sector," Mr Noonan told Mr McGrath. Defending the limits, Mr Noonan said that most credit unions that have had a limit imposed on them still have the freedom to lend €20,000 or more to an individual member.


Mr Noonan said that only a tiny minority with restrictions imposed on them have been told to give out no more than €10,000 in loans to individual members.

He added that the registrar at the Central Bank regularly reviews the restrictions "to determine whether they are still set at appropriate levels".

But the league said the restrictions were just one of a number of controls imposed on the sector by the Central Bank.

"In our view these fail to take account of the capacity of credit unions to lend and the ability of members to service new loans."

It also said credit unions were being prevented from lending by the "road-based restrictions".

"Restrictions on a credit unions ability to lend is further isolating vulnerable groups of people who, having being refused credit by banks, building societies, have nowhere else to turn other than moneylenders," the league said.

The league called for a more open and transparent dialogue between the member-owned lenders and the Central Bank. It also said lending is the main method credit unions have of making money for the 2.8 million members who own them.

Irish Independent

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