Restrictions on Credit Unions threatening the movement's future viability

Fears for the future operation of credit unions across Mayo and the country have been highlighted by Ballina TD Michelle Mulherin at a Fine Gael parliamentary party meeting this week.

Deputy Mulherin has called on Minister for Finance Michael Noonan to look at the stranglehold the Registrar of Credit Unions currently has on credit unions, which is prohibiting them from offering a complete service to their members. The Minister has confirmed to Dep Mulherin that he plans to recapitalise credit unions to the tune of between half a billion euro and €1 billion but the protection of shareholders and depositors would be of paramount importance during this process.

Some of the major issues being faced by Credit Unions is their inability to restructure loans in the same way that banks can. This does not mean that their members are going to default on loan repayments, but would give them breathing space if they were able to stretch out the term of their loans given the current economic difficulties faced by many.

There are three million credit union members nationwide. In Mayo there are approximately 15 branches.

According to Dep Mulherin controls being placed on credit unions by the Registrar are a “knee jerk reaction” to the banking crisis.

Most credit unions are not experiencing any financial difficulty but they are having problems with the Registrar, explained Dep Mulherin. “While the economic crisis has presented challenges to credit unions, the movement is in general good health,” both the president and CEO of the Irish League of Credit Unions told Dep Mulherin. While it is inevitable that arrears and bad debts will show an increase during times of challenge, this is to be expected and the vast majority of credit unions are both adequately capitalised and have made sufficient provisions for future losses, a letter from the league to Dep Mulherin has outlined.

The Registrar has set out limits on the amount of loans credit unions can lend to individuals as well as a cap on the amount of money they can lend per month.

“Credit Unions didn't engage in reckless lending like many banks did and they are at a loss as to why restrictions are now being placed on them.

“In some instances they can't even loan a good customer €1,000 at a time when a lot of decent hard working people look to the credit union for small loans to assist with college costs or Christmas. “People are being pushed to unlicensed money lenders and loan sharks,” said Dep Mulherin.

Rules which don't allow credit unions to restructure loans in the way the banks can are crippling the volunteer movement, which is seen as the lifeblood of rural Ireland. And credit unions who have remained compliant throughout the banking crisis feel they are now being penalised unfairly, according to Dep Mulherin, making it very difficult to offer a good service.

The Ballina TD claims the Registrar is pushing ahead with changes to how the credit unions are being governed without waiting to hear what the Commission on Credit Unions has to report.

A big problem is the lack of uniformity in how credit unions are being dealt with, with a plethora of rules being handed down making their day to day business untenable.

Minister Noonan has told Dep Mulherin he will look at the relevant issues. The deputy has stressed to him the degree of urgency involved given that legislation which aims to regulate credit unions is coming down the line.

“We need to value and uphold the credit union movement, where morale among the volunteer members is low at the minute,” said Dep Mulherin.

“Credit unions shouldn't carry the can for the troubles caused by the banks,” she added.

The Irish League of Credit Unions is anxious that the Minister for Finance allows the Commission on Credit Unions to do its work and not be undermined by excessive and disproportionate regulatory interventions.



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