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Borrowers face tough checks in new credit union curb

Credit Unions are to crackdown on lending and carry out full financial checks on anyone seeking a loan.

Managers at the country's 530 branches have been instructed to "use the facilities provided by external credit reference agencies" before they hand over money.

They have also been warned to expect unprecedented pressure from members applying for new loans or looking to reschedule existing loan repayments over a longer period.

Deputy registrar of the organisation James O'Brien has told the managers to ensure they have a complete financial profile of any borrower to ensure that the risk is fully assessed and understood, before they sanction a loan.

He says the new restrictions are necessary as the recession squeezes the organisation's 2.9 million members.

Defaults

Mr O'Brien points to a "significant increase" in the number of loan arrears, defaults and rescheduling of repayments saying any new decisions to lend must be based on conservative estimates of the borrower's ability to repay.

"The practice of making lending decisions in a vacuum must cease as it defies logic and good business practice."

Speaking at the Credit Union Managers Association spring conference, Mr O'Brien warned that savers might not be as loyal to their credit union as they had been in the past and the "strong funding base" of branches could not be taken for granted.

"Member's savings are likely to become less 'sticky' in the future as credit unions experience increased competition for these funds," he said.

"It is also likely that members will need to draw down on their savings as finances tighten," he added.

csheehy@herald.ie


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