Credit union league accused of anti-competitive practices

The Competition Authority has claimed before the High Court that the Irish League of Credit Unions (ILCU) has engaged in anti-competitive practices and abused its alleged dominant position.

The authority claims the ILCU has breached the Competition Act 2002 by requiring credit unions to be members of the ILCU before availing of its Savings Protection Scheme (SPS), worth up to €90 million, which provides maximum compensation of some €12,700 to individual members where a credit union experiences financial difficulties.

By requiring members to take out loan protection and life savings cover (LPLS) with ECCU Life Assurance, a company controlled by the ILCU, the authority claims the ILCU is abusing its alleged dominant position in the alleged market for credit union representation.

The ILCU has denied the claims. The action, in which the authority is seeking several declarations and injunctions against the ILCU, opened yesterday before Mr Justice Kearns and is expected to last more than two weeks.

Among the orders sought is an injunction requiring the ILCU to amend its rules to permit non-ILCU members to participate in the SPS on the same terms as ILCU members and restraining the disaffiliation of any credit union in circumstances where disaffiliation would mean loss of access to the SPS.

Outlining the case, Mr Paul Gallagher SC, with Mr James Connolly SC, for the authority, said the ILCU has 540 member unions, some 2.6 million members and assets of more than €9.58 billion.

He said the breaches of the Competition Act arose after the ILCU threatened last year to disaffiliate several member unions when those unions refused to take out LPLS cover with the ECCU. The credit unions in question had claimed they could obtain LPLS cover at cheaper rates than available from the ECCU, which company's charges included a levy to fund the ILCU.

Some of those unions had become members of the Credit Union Development Alliance (CUDA), which was formed in 2002. CUDA has 20 member unions, 350,000 individual members and assets of €1.2 million.

The authority claims the move by the ILCU to disaffiliate the unions which took non-ECCU cover meant those unions would lose their right to participate in the league's SPS, set up in 1989 to protect the savings of credit union members. Under ILCU rules, a union may only participate in the SPS if they are affiliated to the ILCU.

In its defence, the ILCU denies that activities described by the authority as "credit union representation" are activities taking place in trade.As a result, it pleads that it is not an "undertaking" within the meaning of the Competition Act 2002.

It pleads that member credit unions resolved in 1976 to purchase LPLS cover from the ECCU. The commission charged on the sale of ECCU products provided the ILCU with a primary source of income to fund its activities, including the operation of the SPS. The pricing of ECCU products also comprised an element of community rating.

It pleaded that, in requiring member unions to take out LPLS cover with ECCU, it wished to provide insurance on more attractive terms to all of its member unions.

Without that requirement, more attractive credit unions (by reason of their membership age and work profile) would be cherry-picked by insurers, leaving the remaining unions vulnerable to significantly higher premium rates, contrary to the operating philosophy of the credit union movement.

The case continues today.