Michael Noonan defends approach to credit union reform

Credit unions unhappy with lending restrictions can apply for a review of their conditions, Minister for Finance Michael Noonan has said. He defended the Government's approach to reform of the sector and said "we have taken a whole range of initiatives".

Mr Noonan said the Government appreciated that lending restrictions could irk some credit unions but pointed out that they could apply for a review by the deadline of September 30th.

He said 51 per cent of the 376 operating credit unions are subject to lending restrictions, which in most cases “are intended to be short-term in nature and kept in place until the credit union has addressed the issues giving rise to the particular concerns”.

Mr Noonan added that the limits imposed ensured that those credit unions could continue to make loans “significantly more than the average value for gross loans outstanding for the sector of just above €6,000”.

Restricted amounts

The majority of restricted credit unions could still lend amounts of between €10,000 and €30,000. Only four credit unions had a maximum loan size restriction of less than €10,000.

The Minister said there had been accusations that the credit unions registrar had acted in an arbitrary fashion and that there was no appeal. There was an appeals mechanism and the credit union sector should communicate that to its members.

The Minister was replying to a Fianna Fáil Private Members’ motion calling for a concerted State initiative to ensure the full potential of the credit union sector.

Party finance spokesman Michael McGrath warned that the proposed cap on savings, which had already caused reputational damage to credit unions, would drive funds into the banking sector and distort competition between banks and credit unions.

“The current regulatory structure does not support credit unions developing additional products and services,’’ he said. “And not a single credit union has received approval for additional services since the banking crisis began.’’

Mr McGrath said the approval process for credit unions seeking to engage in services such as debit cards was very unclear. “Credit unions need to be able to offer services, such as debit cards, if they are to be able to attract younger customers and to compete with the banks,’’ he said. “They also need to be able to offer more products online.’’