Credit unions bid to ease controls in new legislation
BOARD members of the Irish League of Credit Unions (ILCU) will meet officials of the Department of Enterprise and Employment this week to put their case for changes in the Credit Union Bill.
The ILCU wants the proposed limits of £20,000 on loans, shares and deposits to be changed to take into account the variation in the sizes of the 440 credit unions throughout the State.
It is unhappy with the regulatory environment proposed and will argue that the current "internal audit function" it carries out be recognised in any new legislation. The ILCU is concerned about the proposal to restrict the rights of credit unions to buy or own property not exclusively for their own use.
General secretary, Mr Tony Smyth, said yesterday that the ILCU was prepared to set out its case to the Minister of State for Commerce, Science and Technology, Mr Pat Rabbitte.
"We are taking the minister at his word. He has offered to talk on each of the issues of concern to us. We believe we can put up solid and justifiable argument on each of them," he said.
The ILCU is prepared to negotiate the caps on the size of individual loans, amounts in deposit accounts and the amount of shares that can be held by members, according to Mr Smyth.
But any limits set must take into account variations in the size of credit unions, he said. Credit unions operating in the Irish market range in asset size from £55 million to £0.5 million.
Limits on loans and deposits should be set as a percentage of each credit union's total assets or total liabilities, he said, arguing that there was no logic for any cap on the amount a member can invest in shares.
The ILCU would like to see the limit on individual loans set at five per cent of a credit union's total assets or £20,000, whichever is the greater.
"We always make a judgment on prudential grounds on any loan application, taking into account the ability and willingness to repay, among other factors. But a limit of £20,000 is unrealistic and would restrict the development of some of the larger unions" he argues.
More than 370 of the credit unions currently make individual loans in excess of £20,000, he said, adding that a second hand tractors costs about £25,000.
On deposits the ILCU will argue for a limit on individual deposits of two per cent of the total liabilities of the credit union involved or £20,000, whichever is the greater.
A cap of the amount that can be invested in shares "makes no sense", he said. There is a current limit of £6,000 which is to be raised to £20,000 under the terms of the Bill.
"It could not allow one wealthy investor to take control of the society even if he owned 50 per cent of the shares because we operate on the basis of a one person one vote," he said.
The ILCU considers the Bill's provisions on regulation and control to be excessive and inoperable.
"The Registrar of Friendly Societies carried out 90 inspections of credit unions between 1987 and 1993 while the League itself, as a sort of internal auditor for the movement, carried out 3,200 inspections. How will the Registrar be able to carry out all the function expected of him under the Bill?" he asked.
The credit unions have a good record on self regulation as well as a saving protection scheme and clearly set out operational rules, he said.
While it was happy with the Registrar as the overall regulator of the movement he maintained that the Bill went too far in terms of day to day interference by the regulator in the running of credit unions.
Other issues which the ILCU wants to discuss with Mr Rabbitte include the proposed rules on property ownership and methods set out for approving new services which it considers too cumbersome.
Mr Rabbitte has said that no section of the Credit Union Bill is immutable. "I am open to reasonable argument. If deficiencies are identified or worthwhile suggestions made they will be responded to positively", he said.
Some of the proposals were heavily criticised at the ILCU special Conference in Limerick at the weekend.