Two jailed over credit union arrears

TWO members of a Cork city credit union who failed to repay borrowings were sentenced to prison in the past two months.

The two members of Gurranabraher Credit Union (GCU) were held in contempt of court for failing to show at a hearing to establish why they had not complied with the terms of their installment orders.

As a result of their no-show, the court handed down jail terms ranging from 10 to 25 days. In addition, the court granted 55 installment orders to GCU in 2010 to ensure members who have fallen into arrears meet specified repayment schedules.

Manager Philip Hosford said more than 700 members’ accounts are in arrears for more than nine weeks, the initial benchmark against which arrears are measured. However he said arrears are being “actively managed” and that the credit union has a budgeting officer who sits down with members to work out a repayment plan. Members who qualify are offered a reduced payment plan for 12 weeks, which is then reviewed.

The figures were outlined on Monday night at the often acrimonious annual general meeting of GCU attended by fewer than 200 of its 15,000-plus membership.

The credit union spent almost €190,000 on debt collection in 2010, close to double the amount spent the previous year. It was forced to write off €225,354 in bad debts, almost €50,000 more than last year. It has also doubled its bad debt provision from €1.36m in 2009 to €2.77m in 2010.

In her address to members, chairwoman of the board of directors Catherine O’Connell said one of the main issues facing GCU “relates to the issue of arrears on loans”.

“Unfortunately, many of our members have lost their jobs or suffered a reduction in pay and this has negatively impacted upon these members’ ability to both repay existing loans and get new loans,” she said.

Members were reassured that funds invested on their behalf were part of a “very well managed and controlled investment portfolio” with in excess of €40 million in cash, and that GCU did not hold “any high risk, unguaranteed bonds”.

Ms O’Connell said GCU was fully compliant with Central Bank reserve requirements and members were told the credit union has no liquidity or solvency issues. Its loan portfolio stood at €44m on September 30, 2010, down 10.7% on 2009. Members’ shares stood at €77.3m, a decrease of 7% in the loan to savings ratio since 2009. During the year, members drew down 5,467 loans with a value of €12.4m.

Members were told there would be no loan interest rebate in 2010 and a dividend of just 0.5%, down 1% on last year. One member said he considered it unfair that a loan interest rebate was not being paid given “members’ loans are the lifeblood of the credit union, generating four-fifths of its income”, including €4.3m in interest on members’ loans last year.