Workplace credit unions criticised

A number of workplace credit unions have been hardballing borrowers and deducting payments directly from their wages as employees slip further into mortgage arrears.

The Free Legal Advice Centre (FLAC), said they had come across a number of cases where, due to their unique position, workplace or industrial credit unions such as those operating in the Garda and ESB, have been able to deduct money from borrowers directly from their payroll and even from former employees’ pensions.

FLAC senior policy analyst Paul Joyce said that these credit unions were operating attachment orders which are illegal in Ireland.

“It is effectively a form of an attachment of earnings order which is not available in Ireland other than in maintenance cases,” he said.

Mr Joyce said that they had seen a number of cases through the Mortgage Advice and Budgeting Service (MABS) where people have fallen behind in the mortgages, which are secured against their homes, as the workplace credit unions have continued to make deductions at source for money owed on unsecured loans.

“People have been getting into mortgage difficulties while the Credit Union says that they have the right to continue to make the deductions,” he said.

Mr Joyce said the copy of the agreement that he had seen had given all the power to change any payments to the Credit Union.

One agreement for payment to be taken out directly which Mr Joyce had seen read, “I accept this instruction can only be terminated or varied by the credit union,” he said.

Mr Joyce said that the situation makes a complete mockery of the code of conduct on mortgage arrears where borrowers are supposed to be allowed to prioritise their mortgage repayments.

However, a spokesperson for the Irish League of Credit Unions said that the code of conduct does not apply to credit unions.

The spokesperson said that if a borrower is struggling they should contact their credit union. “If a member is in financial difficulty or is unable to repay a loan, we would urge that member to speak to their credit union at the earliest opportunity to discuss the possibility of changing their repayment plan.”

The Central Bank said the direct deductions were a long-standing practice used in industrial credit unions. A spokesperson for the bank said that they had drawn up a framework for borrowers with multiple debts.

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