Saturday 15 December 2018

Regulator to investigate car prize draws at credit unions

(Stock photo)
(Stock photo)
Charlie Weston

Charlie Weston

The Central Bank is carrying out a probe of credit unions to see how they conduct car draws.

It follows controversy at now defunct Rush Credit Union when investigators were unable to find the winners of 15 car draws, even though more than €220,000 was spent on the vehicles.

There were claims that a staff member, who has since left, may have "won" a car in one of the draws run by the north County Dublin lender.

Allegations were also made that some members of Rush Credit Union were entered into car draws without their permission or their knowledge.

In an affidavit presented to the High Court in November 2016, the Central Bank said it emerged that Rush Credit Union ran 15 car draws from 2010 to 2014.

"Grant Thornton has been unable to locate details of winners of previous car draws, as no information is recorded or published on Rush [Credit Union's] website," regulators said in the affidavit.

Some €450,000 has had to be returned to members, many of whom were entered into the draw without their consent.

Now it has emerged that the Central Bank is carrying out what it calls a thematic review of prize draws in a number of credit unions to ensure there is no repeat of the Rush situation.

A small number of the lenders are selected and their processes then checked.

Draws are popular in credit unions, with most running competitions where members can win a new car. Others offer cash prizes.

The entry price is usually around €100, with members able to buy a ticket outright or have withdrawals made on a regular basis.

The probe comes after the regulatory rule book for credit unions, known as the handbook, was updated to make the draws more transparent.

Members now have to be told if staff and volunteers, who run their credit union, are eligible to enter the draw.

And members can only be entered into a draw if they have given written consent, and it must be made clear how the winners will be announced.

Details of the outcome of the review are due to be released in March.

News of the probe of prize draws emerged in the first speech of new credit union registrar Patrick Casey.

He said credit unions need to invest in new technologies in order to compete with challenging new entrants to the market.

Mr Casey suggested sharing services may be the best way to do this.

And he warned that "great care" is needed when credit unions consider getting more involved in mortgage lending.

"Our recent home loan thematic review showed findings which suggest that some credit unions have commenced mortgage lending without fully assessing and implementing a well-developed business plan," he said, at the annual conference of the Credit Union Development Association.

He added: "Mortgage lending has its own unique risk characteristics.

"Any entry into the mortgage market requires careful analysis, planning and execution, reflecting the unique operational risk and viability characteristics of the business of making long-dated loans to members to buy homes."

Mr Casey also warned that the large number of mergers of credit unions has yet to produce benefits in terms of better financial performance by the enlarged entities.

A review of the impact of mergers is to be carried out by the registrar.

Irish Independent

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