Credit union loan referred to IFSRA

A member of a Cork credit union with €127 on deposit and no savings history, got a €127,000 loan approved within 48 hours.

Members of the Gurranabraher Credit Union have been issued with a letter by their board informing them of the latest developments in the Ernst & Young inquiry into the operation of the institution.

The circumstances of the May 2001 loan have been referred to the Irish Financial Services Regulatory Authority (IFSRA). The loan is one of a number of transactions across the credit union's books which are being investigated by Ernst & Young at the request of the board.

The circumstances surrounding the loan were referred to the Garda on the advice of the credit union's solicitor and the Garda report on the matter was recently laid before the board, according to the letter.

"The board is extremely concerned about the contents of the Garda report and the Ernst & Young report as it appears that the granting of the loan was a serious breach of the rules and regulations of the credit union," the letter states.

"The question of whether the granting of the loan breached the Credit Union Act itself is now under review. This loan was the largest loan in the history of the credit union."

The letter states that the use of members' money to fund such a loan to someone with no security and no savings history, is a huge source of concern to the board.

All loans exceeding €40,000 require board approval but the current board of the credit union is not satisfied that the €127,000 loan was approved by the board in existence at the time of the loan, according to the letter.

"Because of this and other concerns and as recommended by the gardaí, all the circumstances of this loan have been referred to the IFSRA."

The letter states that the Ernst & Young inquiry has revealed other matters of serious concern. One member's account has been referred to the Garda Money Laundering Unit. It also states the board is satisfied that the credit union is being professionally run.

The Gurranabraher Credit Union in Cork City has an asset base of €65 million and more than 15,000 members. It is one of the biggest credit unions in the Republic.

However, its affairs have been the subject of controversy and it has been the subject of an investigation by the Registrar of Friendly Societies, the regulator of the credit union sector.