We're turning away from credit unions as money worries mount
CASH-strapped consumers have been forced to stop borrowing from their credit union because they fear they will not be able to meet the repayments.
New figures show that the value of loans issued by the community lenders have collapsed by €500m in the first nine months of the year.
The Irish League of Credit Unions said the total loaned out by its 387 member credit unions fell 10pc to €4.53bn in the nine months to September compared with last year.
League boss Kieron Brennan said the movement's 2.7 million members have been gripped by fear and were putting off taking out loans in case their financial situation gets worse.
"Members have been gripped by a fear factor and they are not borrowing.
"Many people who would normally take out a loan are unsure of their own financial circumstances and unsure of the economic landscape," he said.
Lending is the main income stream for credit unions, with the dip in borrowings expected to put a further squeeze on the health of the sector.
Loans from credit unions tend to average around €7,000, with people typically borrowing to buy a car, fund education or pay annual bills such as insurance.
Mr Brennan also blamed restrictions on lending imposed on around half of credit unions by regulators in the Central Bank.
Under-pressure householders are also dipping into their savings to fund their day-to-day living.
Savings in 387 credit unions that are members of the league are down €310m compared with last year.
The fall in lending and the lower level of savings is despite a rise of 20,000 in the number of people who are members of a credit union.
Members are behind on their payments on one-fifth of all loans given out by credit unions, the league said.
This amounts to €912m in loans that are 10 weeks or more in arrears.
And credit unions have put aside €723m to cover bad debts, where they feel they may never have loans repaid.
Mr Brennan said the arrears level and the bad debts figure had stabilised.
He claimed just five member credit unions were set to record a deficit this year, compared with 81 last year.
Last year 140 credit unions that are members of the league did not pay a dividend, or a return on savings, as they had recorded a loss or wanted to put more money aside to cover loans that were in arrears.
But Mr Brennan claimed this year more credit unions should be able to pay a dividend.
He said credit unions were "sorting themselves out". Despite this, proposed legislation for the sector would mean severe restrictions on who can become a director of their community lender.
The league said the restrictions were more severe than those imposed on the banks that had bankrupted the country.