Borrowers in debt more likely to pay off credit unions

BORROWERS WHO have debt judgments registered against them are at least three times more likely to try to repay those debts if they are owed to a credit unions rather than to the mainstream banks, according to figures from the company behind the debt defaulter magazine Stubbs Gazette.

The company said that 45 per cent of bad debtors who have had judgments registered against them this year over debts owing to credit unions have tried to make at least a part-repayment of the debt.

This compares with 15.4 per cent of defaulters owing money to Bank of Ireland trying to make repayments, 6 per cent to AIB, 2.7 per cent to Bank of Scotland and none to Irish Bank Resolution Corporation, the new name for Anglo Irish Bank and Irish Nationwide.

“One of the main reasons for this is that banks are perceived as being effectively closed for future credit while individuals who may need to call on credit unions in the future are keen to regularise their position,” said James Treacy, managing director of Stubbs Gazette Credit Bureau.

The percentage of debtors with credit union judgments registered against them who attempted to repay their loans rose this year from 40 per cent in 2011, the figures show.

Mr Treacy said the company had found, through focus group discussions with debtors, that high interest rates charged on unsecured debt such as credit cards meant that repayment of this debt took priority.

Credit unions were also an important source of money for borrowers who struggled to source finance elsewhere, he added.

“Debtors are more willing to pay down unsecured debt before secured debt – that is absolutely borne out by the analysis in our figures,” said Mr Treacy.

“It may be that credit unions are the lender of last resort as credit gets tighter.

“That is why they are making a big effort to pay down these debts.”

Credit unions have registered 692 judgments on debts totalling €10.9 million so far this year, according to an analysis of debts published in Stubbs Gazette.

This compares with 687 judgments on debts of €11.6 million during the same period last year.

The average debt judgment registered by a credit union so far this year has been €15,800 compared with €16,900 last year.

Stubbs Gazette said that Derg Credit Union in Co Clare has registered the highest number of judgments against customers this year, with 46 judgments, followed by Finglas Credit Union with 43.

St Francis Credit Union in Co Clare has the third-highest number of judgments in 2012 with 33, followed by Coolock-Artane Credit Union with 32 and Wicklow Credit Union with 19.

The highest credit union judgment registered this year is a €675,000 debt against a Waterford man by Waterford Credit Union.

The next highest is a €329,000 judgment registered by Cúchullain Credit Union in Dundalk, Co Louth, against a publican.

The Government has set aside €500 million to strengthen weaker credit unions in the State by merging them with stronger credit unions.

About €1 billion or one-fifth of all loans provided by Irish credit unions is in arrears – classified as customers being 10 weeks or more behind on repayments.

The State’s biggest bank, Bank of Ireland, has said a high level of unsecured debt is a common problem in resolving bad mortgages and that restructuring that was a key element of fixing problem mortgages in the long term.

The bank said it had restructured unsecured debt for thousands of customers and this had been “very helpful for customers in managing their mortgage repayments and retaining their home”.

The lender said it had found it more difficult to find longer-term solutions for unsustainable mortgages where the unsecured debt has been provided by another bank.