Small, local credit unions won’t survive

Merging is the way forward for credit unions as fears are expressed that lending restrictions imposed by the Central Bank are facilitating unregulated moneylenders

Some credit unions are struggling to offer new car loans because of lending restrictions imposed by the Central Bank, the ACCA said today.

Some credit unions are struggling to offer new car loans because of lending restrictions imposed by the Central Bank, the ACCA said today.

Tue, Feb 25, 2014, 16:39

FIONA REDDAN

The days of small, proud to be local, standalone credit unions are numbered, the Association of Chartered Certified Accountants (ACCA) warned today, noting that the merging of credit unions is the only way forward.

At a conference hosted by ACCA Ireland, to provide a roadmap to advisors on credit union mergers, Aidan Clifford, technical director of ACCA Ireland, said that the financial crisis has focused the regulator’s attention and brought about new legislation and prudential regulations. These, he said, “have numbered the days of the small, proud to be local, stand alone credit unions. The merging of credit unions is the only way forward.”

Noting that 50 per cent of all credit unions are currently under lending restrictions from the Central Bank, Mr Clifford said that this makes it a “very difficult environment for them to operate in”.

“Many cannot even, for example, offer new car loans – no matter how good the credit risk of the borrower. As credit union loans are ‘secured’ loans under personal insolvency law, many credit unions have set aside reserves to cover bad debts of sometimes up to 30 per cent of their loan book,” he said, adding that there is a debate as to how excessive the level of bad debt provisioning in the credit union sector is, and that restrictions in lending could play directly into the hands of unregulated moneylenders.