2.6m MILLION MEMBERS TO BENEFIT FROM NEW LENDING LIMITS
2.6m MILLION MEMBERS TO BENEFIT FROM NEW LENDING LIMITSIRISH LEAGUE OF CREDIT UNIONS SECURE NEW DEAL FOR
LOAN EXTENSION FOR BORROWERS
At the publication of the Central Bank Bill today the Minister for Finance, Brian Lenihan T.D., announced that the Irish League of Credit Unions (ILCU) has concluded negotiations with the Registrar for Credit Unions which have delivered significant changes to Section 35 of the Credit Union Act 1997 by extending lending limits in order to assist members that are experiencing financial stress and need to reschedule their loans. The attached changed regulations will allow for these circumstances, but will also ensure that the financial position of the credit union is safeguarded and is accompanied by honest, prudent and transparent accounting practices.
Commenting on the announcement, Mark Bailey, President of the ILCU, said “We had a meeting with the Minister for Finance about this issue and he was very anxious to help credit unions help their members. He asked that this issue was resolved between the ILCU and the Registrar of Credit Unions to offer all credit unions and their members more flexibility and clarity on the issue of loan repayment. We are satisfied to have brought about a conclusion to these negotiations as we have been lobbying for this intensely over the past number of months”.
Up until now the limits on lending, contained within the Credit Union Act, are that loans over 5 years are limited to 20% of the credit union’s total loan book. This limit has now been increased to 30% which will allow us to have more flexibility when dealing with our members’ difficulties. Part of our ethos is to help people in difficult times and therefore this is a significant issue for credit unions. These changes will enable credit unions to assist their members in the same prudent and compassionate manner as they have done over the past five decades.
In conclusion, Kieron Brennan, CEO of the ILCU said “Whilst recognising the benefits that this announcement will bring to credit union members and ILCU affiliated credit unions, there are also conditions attached to rescheduling of loans, certain provisioning against bad debts and particular liquidity levels must be maintained. There are also clear definitions of what constitutes a rescheduled loan. All applications must be supported by appropriate fact finding and loans can only be rescheduled in agreement with the member. Regular evaluations of said loans by credit unions will be put in place in order to provide reports to their respective boards. This new arrangement is good for our members and good for credit unions”.
Minister for Finance, Mr Brian Lenihan, TD, announces the extension of longer-term lending limits for Credit Unions
The Minister for Finance, Mr Brian Lenihan, TD, announces the extension of longer-term lending limits for credit unions under Section 35 of the Credit Union Act 1997. The extension requires to be underpinned by primary legislation and so an amendment to Section 35 is provided for in the Central Bank Reform Bill 2010 which the Government published today 30 March.
The initiative addresses, in particular, the need for credit unions to be in a position to facilitate rescheduling of loans. It is accompanied by requirements to ensure that the financial position of credit unions is safeguarded. It is intended to allow credit unions assist members experiencing financial difficulties so that they may continue to make repayments on their loans, albeit smaller ones. In this way, borrowers may continue to manage their personal finances and not break the good habit of making regular repayments.
The amendment to Section 35 of the Credit Union Act 1997 will extend the lending limit for loans over five years from 20% to 30% for all credit unions; empower the Registrar of Credit Unions to impose requirements on credit unions in relation to lending practices; and require credit unions to have appropriate systems in place to monitor compliance with Section 35. The overall initiative includes additional requirements with regard to liquidity, provisioning for rescheduled loans and formal arrangements in relation to the management and reporting of rescheduled loans.
The Minister stated: ‘As Minister for Finance I have supported the development needs of credit unions to ensure they continue to provide for the financial, saving and borrowing needs of the communities they serve. Many credit union members are experiencing difficulty in meeting loan repayments due to unfavourable changes in their financial circumstances in the current economic environment. Increasing the lending limit for credit unions and formalising arrangements in the area of rescheduling of loans will facilitate credit unions in their wish to ease the position of these members. Accompanying requirements with regard to liquidity and provisioning will protect the financial stability of credit unions and ensure that the security of members’ savings is maintained.’
