Tom Fleming (Kerry South, Independent) | Oireachtas source

The principal focus for all credit unions is on providing services to their members in their own communities. The onerous burden being imposed on credit unions by the current fitness and probity regime is driving many otherwise relatively strong credit unions into unnecessary mergers, without any consideration, in many instances, for the maintenance of local services into the future. If a credit union becomes part of a bigger organisation, it ceases to be part of the community, and it will be only a matter of time before the local credit union office closes and the services it provided will be lost forever to that community. Currently, there is a drive away from local personal service provision in many sectors of the economy, and the impetus to rationalise credit unions is yet another example of this. If the same energy and resources that are currently being expended by both the regulator and the individual credit unions on the implementation of the fitness and probity regime were diverted into developing and expanding services and assisting credit unions in growing and developing organically, the credit union system would be in a far healthier state.

Over recent years, credit unions have experienced declines in their loan books, and while this could be attributed to a lack of credit demand generally, it is clear that the economy is slowly improving, which in turn is leading to a growth in loan demand. Many credit unions are not in a position to respond to this increase in demand as a consequence of the imposition of restrictions. It is imperative, therefore, that the Central Bank review its policy relating to these restrictions so as to give credit unions the necessary additional flexibility to deal favourably with new loan applications. Stringent regulation in recent years has meant that credit unions are now extremely reluctant to lend to disadvantaged members who have no other source of credit apart from moneylenders. It is extremely regrettable and, indeed, shameful that the moneylenders' loan books have expanded enormously while the loan books of credit unions have been diminishing at the same time.

The regulator has acknowledged that credit unions are extremely well reserved. However, the issue of credit union viability remains the focus of attention. Write-downs in the value of premises have been used as a mechanism to weaken the reserve position of many credit unions so as to force a merger or a resolution upon them. The not-for-profit ethos of the credit union has been forgotten.

The proposal to impose a ceiling on the level of savings a member may hold will have enormous reputational implications for credit unions. Members will be forced to withdraw their savings and place them in rival institutions. Credit unions will also be put at a disadvantage in trying to attract new deposits.

The regulator is currently advertising information on interest rates and terms of loans. However, there is very little oversight in evidence when it comes to more general advertising, particularly in respect of car purchase agreements. In a recent survey, it was found that many people who had availed of these arrangements were not aware of the interest rate or the amount financed under these agreements.

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