Credit unions facing Financial Regulator probe

THE FINANCIAL Regulator has been asked to investigate credit unions use of members funds.
The probe was called for by leading public interest lawyer Colin Daly – who successfully represented a client in a land mark case against a credit union in 2009.
Mr Daly wants the regulator to look into the way credit unions can take legal fees incurred in the pursuit of arrears on loans while members cannot use savings to clear arrears.
Court action is even being taken against members who already have a working agreement in place to pay off arrears.
Mr Daly said last night: ‘I am going to ask the Financial Regulator to investigate why someone can’t discharge their arrears with savings they have with a credit union.’
He added:  ‘A person who has come to an agreement with their credit union could
raise a defence that the original contract has been varied and it could be argued that the new agreement supersedes the old one.
‘The policy of proceeding to judgement against people who have working agreements in place to deal with their arrears is a terrible waste of members money.
‘This is especially the case where there is little possibility of the judgement being enforced.’
An imprisonment order against one of Mr Daly’s clients Caroline McCann was ruled invalid in June 2009.
The Monaghan woman, who had failed to pay €6,000 on an €18,000 loan, had been sentenced to a month in jail for failing to pay.
Her subsequent High Court success effectively means that people who can’t pay their debts will no longer be jailed.
Mr Daly’s approach to the Financial Regulator comes as the number of complaints about credit union heavy-handedness is increasing.
The focus recently  has been on banks off the back of remarks made by the Master of the High Court, Edmund Honohan.
Last Wednesday, he said he felt the the pursuit of debtors was leading to social disquiet and driving some to suicide.
And he said he wanted legislation to be introduced to ‘put a brake’ on the growing number of judgments against people who cannot pay their debts.
But credit unions are increasingly reverting to bully-boy tactics more associated with banks according to a growing number of reports from members.
In one case, a south west family are currently facing legal action from their credit union over a loan of under €15,000 despite the fact that they have the means to pay the arrears on the loan.
The family have fallen into arrears with a number of credit card companies, their bank and their credit union.
The family approached the Money Advice Budgeting Service (MABS) and a system of paying back the family’s debt was agreed to.
But despite an acceptance of that system by every other financial institution, the family say their credit union refused to accept it and are threatening legal action if they don’t pay up the arrears and make a full settlement of the loan.
In another case in the north east, a man who fell into arrears on his €10,000-plus union loan has received repeated legal letters and a Civil Bill (a summons to attend court) despite having a working arrangement in place to pay off the arrears.
Around €7,000 is left of the loan and arrears on it are little more than €1,000, it is believed.
Yet, legal fees are now clocking up – with him being charged €75 for each legal letter he receives while the Civil Bill has cost €368.
When the matter reaches the courts, he will also face addition fees of around €500.
Before the civil bill was issued, the man offered to pay the arrears from his savings but the man claims this was refused.However, he subsequently learned that all legal costs incurred are to be taken from his savings.
And he claims that he was also told that legal action is being taken against him ‘just in case’ he defaults on his loan agreement ‘in the future’.
A League of Credit Unions spokeswoman said last night: ‘The member’s savings are pledged against the loan as security.
‘If the member’s savings are not sufficient to cover the loan amount the credit union has a duty to try to retrieve the loan.’
And they added: ‘The primary message to credit union members at all times would be to contact the credit union before difficulties arise, early intervention is a key policy.
‘Credit unions do not access funds from international money markets to fund their lending but rather use savings within the credit union to loan to other members and as such the credit union must protect the interests of all it’s members.’
Last month, Bill Hobbs – former chief executive of the Credit Union Development Association Bill – estimated credit unions will require €650million state help to cope with losses over the next three years.
It was also reported that the Irish League of Credit Unions’ independent savings protection fund has just under €120million.
In its annual report last month, the organisation said that 20 of the 419 credit unions it represents in the Republic had sought financial assistance from the fund.

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