Credit unions seek rule change

MEMBERS of the Credit Union Development Association (CUDA) told a Dáil committee yesterday it believes the regulation of credit unions should stay within the framework of the existing Central Bank/Department of Finance structure.

CUDA’s chief executive, Kevin Johnson, stressed the organisation, which represents 11 major credit unions in Ireland with 275,000 members, wanted to see substantial reform of the guidelines on what the agencies can lend.

The history of the movement is as a provider of loans to those who otherwise were denied loans, he said. That role is more critical at a time when banks are not lending.

Mr Johnson told the committee that the rule which restricts credit unions from lending just 20% of their loans books was too restrictive.

The proposal to extend that figure to 30% would not alleviate the difficulty facing the sector because the amount that can be lent beyond five years is based on the loan books of the individual credit unions and not their total asset base.

With assets nearly double the total loan book the extension of the figure to 30% of loans would still be too restrictive, he said.

Bill Hobbs, who has strong links to the credit union movement and has written extensively on the sector criticised CUDA’s stance on Section 35.

The proposal “is fraught with moral hazard risks”.

They are looking for a way of having to avoid providing for bad loans, he said.