Credit unions to be allowed increase cost of loans
Minister plans to allow interest rate rise on personal loans despite Cabinet opposition
Credit unions are limited to charging customers an interest rate of 1 per cent a month on their personal loans, thus ensuring access to loans at a reasonable rate. File photograph: Colin Keegan/Collins Dublin
Minister for Finance Paschal Donohoe is to proceed with plans to allow credit unions increase the cost of loans they offer their customers, months after he was met with resistance from his Cabinet colleagues on the issue.
Credit unions are limited to charging customers an interest rate of 1 per cent a month on their personal loans, thus ensuring access to loans at a reasonable rate.
However, the Credit Union Advisory Committee (CUAC) has recommended to Government that this should be increased to 2 per cent a month, amid fears that retaining the ceiling at such a low limit reduces competition and could discriminate against high-risk borrowers.
Mr Donohoe is expected to bring a memo to the weekly Cabinet meeting on Tuesday which would follow through on the CUAC proposal.
Earlier this year, he brought the same issue before Cabinet but a number of Ministers raised concerns.
Minister for Social Protection Regina Doherty and Minister for Business Heather Humphreys were anxious about the move, as was Finian McGrath, the Minister of State with responsibility for disability issues. There was concern about changes to the traditional ethos of credit unions at the January Cabinet meeting.
Fair Deal scheme
Changes to how nursing home places are paid for by farmers and small businesses are also set to be approved by Cabinet on Tuesday.
The Government has been under pressure to implement long-promised changes to the Fair Deal scheme, which sees the State share the cost of nursing home fees.
Those using the scheme contributed up to 80 per cent of their income, such as their pension, and 7.5 per cent of the value of any assets in a yearly contribution to fund the cost of their care.
Currently, 7.5 per cent of the value of a home only has to be contributed for the first three years of a person’s time in care. However, no such cap applies to “productive assists” such as farms and businesses.
It has led to protests from groups such as the Irish Farmer’s Association, which has said some farming families have had to sell portions of land to meet nursing home costs.
The IFA held a protest outside the Department of Health on the issue last April, nine months after the Government initially promised it would make changes to how farm and small business owners were treated.
The Cabinet is expected to sign off on the general scheme of a Bill from Minister for Health Simon Harris and Jim Daly, the Minister of State for Older People, to extend the three-year cap on 7.5 per cent contributions to farms and small businesses.
The cap will apply where a family successor continues to operate the farm or business for six years. The change will also apply retrospectively, meaning once the planned law is implemented, it will apply to existing nursing home residents as well as future entrants.
If someone has already paid the 7.5 per cent for one year, they will have to pay for only another two years. Such payments would cease immediately if someone has been in a nursing home for more than three years.