Current market ‘open season’ for moneylenders - credit union officials

Legislative change needed to allow credit unions lend to social housing bodies

Senator Rose Conway-Walsh (SF) said people were paying moneylenders ‘extortionate fees’, ahead of making mortgage repayments. File photograph:  Dara Mac Donaill

Senator Rose Conway-Walsh (SF) said people were paying moneylenders ‘extortionate fees’, ahead of making mortgage repayments. File photograph: Dara Mac Donaill

 

Easing caps on rates credit unions can charge would help tackle the “open season” of high-interest moneylenders operating across the country, credit union officials told an Oireachtas committee.

There was need for a “holistic approach” that included stronger consumer protections, and tougher regulations or legislation, to tackle the problem of moneylenders, Tim Molan, chair of Credit Union Managers’ Association told the Oireachtas finance committee.

People were paying moneylenders “extortionate fees”, ahead of making mortgage repayments, Sinn Féin Senator Rose Conway-Walsh told the committee.

Credit unions are currently limited to charging customers an interest rate of 1 per cent a month on their personal loan. In recent weeks a Credit Union Advisory Committee (CUAC) report to Government recommended this should be increased to 2 per cent a month.

Department of Finance official Brian Corr, chair of the group tasked with implementing the CUAC report, said giving credit unions more flexibility to offer small loans would help prevent people resorting to high-interest moneylenders.

The current regulations were “effectively restricting credit unions from providing some services”, Mr Corr told the committee.

The credit union sector was increasingly getting into the mortgage lending market, as an alternative to commercial banks, the committee heard.

Since the recession, credit unions had lent around €170 million in mortgage loans, Kevin Johnson, chief executive of the Credit Union Development Association, told the committee.

The average mortgage provided by credit unions was worth €110,000, and the sector had not “dived into” the high risk end of the market, Mr Johnson said.

Fine Gael senator Kieran O’Donnell said credit union progress had not been quick enough entering the mortgage market. He said it would provide competition to the “pillar banks”, where there was a “degree of arrogance creeping in again”.

Legislative changes to the Credit Union Act would be needed to allow credit unions finance social housing developments from Approved Housing Bodies (AHBs), officials said.

There was a “huge need” for credit unions to help address the housing crisis, by providing loans to social or co-operative housing developers, Mr Molan said. AHBs build and manage social housing, and include charities such as Focus Ireland, Peter McVerry Trust, and Cluid Housing.

There were “significant difficulties” blocking credit unions lending to AHBs to fund housing developments under current rules, Mr Molan said. Loosening restrictions to allow lending to AHBs was a “priority” for the credit union sector, Mr Johnson said.