CREDIT unions have been warned that many of the loans they have given to those who are now in trouble with their mortgages will not get repaid.
The regulator for the sector also said that one in five credit union loans were in arrears.
Sharon Donnery, the Central Bank official who is registrar for credit unions, told managers of the lending co-ops to improve how they run their organisations.
New rules were being introduced for credit unions and regulators would also have new powers to force the lenders to operate to higher standards, she said.
Ms Donnery told hundreds of managers of credit unions not to assume that their loans would continue to be repaid, even if repayments were being met at the moment.
Many cash-strapped consumers are known to be making payments to the credit union, even though they cannot make payments on mortgages, car loans and credit cards.
People were reluctant to default on a credit union loan in case they close off their last line of credit, experts said.
Ms Donnery told a credit union managers' conference: "Remember that a member may be paying you but in debt to other creditors. As long as that member does not have an overall sustainable solution for their case there is a risk that you will ultimately not get paid."
She said that the largest representative body for credit unions, the Irish League of Credit Unions, had decided not to get involved in a Central Bank move to get credit unions, banks and other lenders to come together and agree to restructure the loans of those who were unable to meet their repayments.
Credit unions claim banks are reluctant to strike deals with over-indebted householders.
But Ms Donnery said that if homeowners who could not meet their payments ended up going through the personal insolvency process, credit unions would come out with very little.
She pointed out that one in five of credit union loans was in arrears for more than nine weeks.
This 20pc figure compares with 11pc of mortgage holders being in arrears for three months or more.