Small firms may appeal if loans are rejected

CREDIT REVIEW: THE GOVERNMENT is to establish an independent review process allowing small and medium-sized enterprises (SMEs…

CREDIT REVIEW:THE GOVERNMENT is to establish an independent review process allowing small and medium-sized enterprises (SMEs), sole traders and farmers to appeal against credit refusals by SME lenders participating in the National Asset Management Agency (Nama).

Minister for Finance Brian Lenihan said yesterday he was determined taxpayers would receive a return in the form of credit which supports Irish businesses and jobs in light of the “massive State commitment to the banking sector”.

The Minister said he would use powers under Nama legislation “to ensure that SMEs, sole traders and farm enterprises will have recourse to an independent, external review of decisions of credit refusal by the banks”.

It would be “a simple, effective appeals process, run by people with experience and credibility”, he said. Banks participating in Nama with SME lending “must comply with the recommendations of the appeal process, or explain satisfactorily why they cannot do so”, the Minister told the Dáil.

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Mr Lenihan has asked banker John Trethowan to oversee the establishment of the credit review system with initial administrative support from Enterprise Ireland.

Mr Trethowan is a former chief executive of National Irish Bank, who oversaw the clean-up of the bank following the overcharging and tax evasion scandal that plagued the bank in the 1990s.

Under the proposed review system, if a lender fails to provide a decision on a credit application within 15 working days – or where the terms or conditions on the credit facility are “excessively onerous” – it will be deemed a refusal, creating a right to appeal.

“A fee will be charged for each appeal, which will be refunded by the bank if successful,” the Department of Finance has said.

Credit appeal decisions will be analysed regularly and published.

The Government also plans to examine the credit policies and practices of the banks for all SME sectors, the Minister said. The appeals process will focus on retail, including car dealerships, tourism and agriculture “where particular stresses have been reported”, the Minister said.

Mr Trethowan will report to the Minister on the banks’ credit policies and the availability of credit to various sectors and Mr Lenihan can take further action if needed.

“I intend to publish the analysis from the review process so that the performance of the banks participating in Nama will be clear to all,” said the Minister.