Written answers

Thursday, 5 December 2013

Department of Finance

Credit Unions Regulation

Photo of Terence FlanaganTerence Flanagan (Dublin North East, Independent)
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68. To ask the Minister for Finance his views that any restrictions applied to credit unions by the Central Bank to lend will lead directly to the increase in moneylenders; and if he will make a statement on the matter. [52368/13]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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The statutory role of the Registrar of Credit Unions is the protection of members’ savings and the maintenance of financial stability and well-being of credit unions generally. All credit unions are required to ensure that they apply scrutiny to all new loan applications and that all applications are fully assessed to determine the borrower’s ability to repay. Credit unions are also required to ensure that they put in place clear limits on the total funds available for granting loans, bearing in mind the need to ensure that they maintain adequate levels of liquidity to support their operations.

In order to protect the members’ savings, it has been necessary to put lending restrictions in place in credit unions where there are regulatory concerns about the operation of individual credit unions and the resultant risk to members’ savings. The number of lending restrictions in place is a reflection of the Registrar’s concerns about lending practices in the sector.

The individual credit union lending restrictions currently in place are reviewed on a regular basis to determine whether they are still set at appropriate levels.

All moneylenders are required to be licensed by the Central Bank, and this category of financial service provider includes:

- home collection firms where repayments are collected at the customer’s home;

- remote firms where payment is made directly to the firm e.g. by direct debit;

- retail firms involved in the provision of goods on credit with repayments being made by a variety of methods e.g. cash, direct debit; and

- other firms who operate on the basis of running accounts e.g. catalogue companies.

The Central Bank recently published a Report on the Licensed Moneylending Industry which is available on its website. The research was undertaken to inform the regulatory approach to the licensed moneylending industry in Ireland and to see how the firms are treating their customers. The Report states that there are 43 licensed moneylenders in operation and outstanding loan amounts are in the region of €200 million; in contrast, outstanding loan amounts in the credit union sector stand at some €4.6bn.

A key finding of the report is that the overriding catalyst for borrowing from moneylenders is convenience and ease of availability and that there is a willingness by these customers to pay a premium for what they perceive to be convenience and access to credit. When asked why they used moneylenders, only 5% of customers responded that it was because they had been refused credit elsewhere, notwithstanding the fact that 77% of respondents report being refused credit elsewhere in the past. The existence of lending restrictions at credit unions does not emerge as a factor in customers using licensed moneylenders.

Where the Central Bank becomes aware of a case of suspected illegal moneylending, it will refer the matter to An Garda Síochána.

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