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Credit union for gardai has €13m of 'doubtful' debt

THE Garda's Dublin Credit Union, the largest in the country, has placed a restriction on the size of loans after admitting to members that it has "doubtful debts" amounting to €13m.

St Raphael's Credit Union has informed its 38,000 members in its annual report that it is still managing assets of close to €350m and has a cash reserve of €41m. It has announced that from this year a cap of €60,000 is being placed on loans.

The credit union's annual report does not indicate how many bad debts are being pursued through the High Court, but it is understood that about 20 cases are running in which the union is seeking repayment of more than €3m. In one case alone, it is seeking the return of a €750,000 loan.

Gardai say that many young members of the force who have taken mortgages and loans are now in severe financial straits as cutbacks in salary and a near complete ban on overtime are imposed. Many had taken out loans based on maximised salary and allowances.

Last week, the Garda Commissioner Martin Callinan announced the reduction by half of the 2010 €21m overtime budget for tackling organised crime. The move impacts most severely on Dublin gardai.

Gardai in Dublin yesterday told the Sunday Independent that there were now instances of young gardai sleeping in rest rooms in garda stations and cycling large distances to work because they can't afford fuel or payments for cars.

The annual report of St Raphael's Garda Credit Union reports "doubtful" debts of €13.1m for 2010. This figure, it says, represents current loans that are in arrears and loans that may go into arrears.

"It represents 6.9 per cent of our total loan book," it says.

The report adds: "Commencing November 2010, we are also required by law to provide for loans that are re-scheduled as a result of members feeling under financial pressure and wish to reduce their loan repayments. This figure of €13.1m also makes some provision for rescheduled loans.

"Given the economic uncertainty we are faced with and the impact on our members' future earnings -- and therefore their capacity to repay their loans -- a further provision was made on the total loan book and this is considered to be prudent."

It puts the figure for "bad debts" -- debts which it is written off or is pursuing in the courts -- at €3.2m for 2010.

It says: "The board of directors is satisfied that this is an appropriate level of provision, given the uncertain economic climate we are in and the impact this is likely to have on the potential earnings of our members. The funds provided for remain as reserves until the loan is repaid or is considered to be no longer at risk."

The report continues: "This is a slight increase on 2009's figure of €3m. Under law, we are obliged to write off loans where no repayment to principle has been made for a 12-month period. This is an accounting procedure designed to ensure that the financial statements accurately reflect the risks inherent with loans of this nature.

"The obligations of the member in respect of these loans do not change and collection efforts, including and up to legal proceedings, continue as normal."

At the request of the Financial Regulator, St Raphael's increased its reserves last year to €41.5m and restricted its dividend to members to one per cent. It states that it "manages" almost €350m.

Officially, gardai are not allowed to be in a position where they cannot repay debt. Older gardai were critical of the policy whereby St Raphael's in Dublin and the St Paul's Garda Credit Union in Cork were effectively competing with each other to provide loans.

St Raphael's set up a branch in the Garda College in Templemore, Co Tipperary, where it was providing recruits with loans before they were officially attested and on permanent salary.

Many young gardai took out loans and mortgages based on an assumption of maximised earnings, including overtime and the force's generous allowances.

With cutbacks, this has left many in tightened financial circumstances. A small number of long-serving gardai, including some in senior ranks, are also understood to have accrued much larger debts from dabbling in the commercial-property market.

Sunday Independent