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Fury at loan axe threat to debt families

CREDIT union loans for Communion dresses and holidays abroad could be a thing of the past for homeowners in mortgage arrears.

CENTRAL Bank officials are worried that lenders such as credit unions and credit-card companies are extending loans to people who have failed to meet their monthly mortgage payments.

Regulators say that they do not want to see a situation where homeowners who have stacked up months of arrears in their mortgage can obtain a loan for a car, a holiday or an event such as a communion.

But the move has been criticised by Dublin City Councillor Mary Fitzpatrick, who said that banks need to "cop on" to the reality of struggling families.

Subprime lenders, banks and credit-card providers are also being warned that they must be more careful in their lending practices.

A letter is to be sent out within the next week to inform all lenders that they must not to provide additional lending to customers in mortgage arrears where they do not have a repayment agreement in place with the mortgage bank.

They fear homeowners have been lax in repaying their mortgage due to the belief that they cannot lose their homes due to provisions of the Central Bank's mortgage protection code and a High Court judgment by Ms Justice Elizabeth Dunne that has blocked repossessions.


They have opted to repay unsecured loans – such as small loans with local credit union or credit card bills – ahead of meeting their mortgage obligations. Officials said that this action is putting the ownership of the house at risk.

Cllr Mary Fitzpatrick (FF) said that the smaller loans provided by credit unions are helping families to keep their head above water.

"I can understand the bank wanting to have their debts paid but it does show real lack of understanding and sensitivity to the real financial difficulties facing families in Ireland today," she told the Herald. "Credit unions provide families and local communities with small loans that can make a huge difference in a family's life."

The Government has pledged to produce legislation to overcome the Dunne judgment by the end of March, in line with Troika requirements.

And a review of the Central Bank's mortgage arrears code is expected to remove protections from repossessions for those who are not co-operating with their mortgage lender.

This could ultimately see banks moving to repossess homes of those who not co-operating with mortgage lenders.

Cllr Christy Burke said that the move would impact on all levels of society.

"It is further dictatorship from the regulator and it is imposing further hardship on low income families," he said.

See Sinead Ryan, page 14