Institutions lending beyond their means

Many credit unions have been lending far in excess of what they can afford, new findings demonstrate, with some individual loans amounting to 20 times the allowable amount.

Fresh data from business intelligence service Vision-net.ie show that instances of individual credit unions chasing unpaid loans through the courts continued apace during the first quarter of this year, with combined debts of €3.6m — a year-on-year increase of 25% — being sought.

The figures show that 183 cases have been brought before the courts so far this year, with credit unions accounting for 17% of total judgment rulings against consumers.

However, the Vision-net.ie data — coming hot on the heels of the Commission on Credit Union’s recommendations for the restructuring of the Irish credit union sector — also suggests a widespread practice of reckless lending within the sector.

According to the company’s data, many unions’ assets have not been sufficient to cover the level of loans they have been granting, with some instances showing credit union loans for almost 20 times the maximum allowable amount being granted.

“Our findings indicate that many credit unions were lending more than they could afford,” said Christine Cullen, managing director of Vision-net.ie.

“This raises questions as to the depth of credit suitability screening which was carried out, and the level of adherence to the 1.5% total asset rule that exists in credit unions for the majority of personal loans.

Ms Cullen said that the increase in the level of court action being taken by credit unions over outstanding loans, and the seemingly reckless lending practices by some, justifies the reforms proposed by the Commission.

“It is important that consumers and businesses borrow money responsibly and according to their means and that those giving credit to consumers or commercial enterprises carry out sufficient risk tests to protect themselves against default,” she added.