The Minister for Finance, Brian Cowen, TD, today (Sunday 4 February) published, on the Department of Finance website, the Report of the Review Group on longer-term lending limits as provided for by section 35 of the Credit Union Act 1997.

The Minister stated: I welcome this Report which provides a solution to the immediate development needs of credit union lending in the context of improved controls and safeguards. I congratulate the Review Group in reaching an agreed solution to the way forward on this important issue for credit unions.

He also said that “I am sure that this report will be welcomed by the credit union movement. I intend to bring forward regulations in the near future to effect the necessary legislative change which will enable credit unions operate under a new lending regime”.

The Report recommends that Section 35 lending limits should be increased for loans over five years from 20% to 40% and over ten years from 10% to 15%, for those credit unions approved by the Registrar as having the necessary controls and safeguards in place and satisfying financial criteria in relation to arrears and reserves.

The Minister considers that the recommendations in the Report strike an appropriate balance between the development needs of credit unions and the protection of members’ savings and has undertaken to introduce the necessary Regulatory amendments in the coming months.

The Report was prepared by a Review Group appointed by the Minister with representation from the Irish League of Credit Unions, the Credit Union Development Association, and the Registrar of Credit Unions.

Ends

Notes for Editors

Membership of the Group

Aidan Carrigan – Principal Officer, Department of Finance (Chair)

Bill Hobbs – CEO, Credit Union Development Association

Denis Daly – CUDA Management Committee and Manager, Tullamore Credit Union

James O’Brien – Deputy Registrar of Credit Unions

Elaine Byrne – Deputy Registrar of Credit Unions

Liam O’Dwyer – CEO, Irish League of Credit Unions

Noel Madden – ILCU Board Director and Manager, Ballinasloe Credit Union

Cathal Sheridan - Assistant Principal, Department of Finance (Secretary)

Background

Section 35 of the Credit Union Act 1997 currently limits credit unions in relation to longer–term lending (i.e. over five years). Under Section 35 of the Act a maximum of 20% of a credit union’s loan portfolio may be outstanding for periods in excess of five years, of which half (10% of a credit union’s loan portfolio) may be outstanding for periods in excess of 10 years.

The Irish League of Credit Unions (ILCU) sought an increase in the Section 35 lending limits and, in April 2006, the Minister for Finance requested the advice of the Credit Union Advisory Committee (CUAC) – the expert statutory advisory body on credit union matters under the Credit Union Act.

CUAC reported in July 2006 that it considered that a review of the current limits on longer-term lending by credit unions should be initiated by a review group to be established by the Minister for Finance.

Group findings and recommendation

The Group recommends that Section 35 lending limits should be increased for those credit unions who submit a Board statement to the Registrar of Credit Unions confirming that the credit union has the necessary controls and safeguards in place to deal appropriately with increased longer-term lending and that specified financial criteria have been met.

Where the Board statement is approved by the Registrar individual credit unions will be authorised to lend up to new increased section 35 lending limits, as follows:

·        over five years from 20% to 40%

·        over ten years from 10% to 15%.

Click here for Report of the Review Group