Tommy Broughan (Dublin North East, Independent)
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170. To ask the Minister for Finance his plans to ease lending regulations on credit unions, in particular for loans of €1,000 or less; and if he will make a statement on the matter. [39011/15]

Michael Noonan (Limerick City, Fine Gael)
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My role as Minister for Finance is to ensure that the legal framework for credit unions is appropriate for the effective operation and supervision of credit unions.

The Registrar of Credit Unions at the Central Bank is the independent regulator for credit unions.  Within her independent regulatory discretion, the Registrar acts to support the prudential soundness of individual credit unions, to maintain sector stability and to protect the savings of credit union members. The imposition of lending restrictions is a matter for the Central Bank who have informed me that there are no credit unions with lending restrictions on loans of €1,000 or less.

Under the European Communities (Consumer Credit Agreements) Regulations 2010 (S.I. No 281 of 2010) transposed into Irish law on 11 June 2010, before concluding a credit agreement with a consumer, a creditor shall assess the consumer's creditworthiness on the basis of sufficient information. The scope of these regulations includes credit agreements where the loan amounts are between €200 and €75,000.

I have also been informed by the Central Bank that while the important role of credit unions within their communities and, of course, that many members have a demand for credit is fully accepted, from a regulatory perspective it is important that credit unions are prudent in how they lend money, particularly as it is the money of the saving members of credit unions that is ultimately lent to borrowing members. Ensuring that those borrowers can repay is paramount in the protection of those savings. Accordingly, the Central Bank expects credit unions to apply prudent lending standards to the granting of all new loans or top-ups of existing loans and to have systems in place to ensure that such applications are fully assessed to confirm the member's creditworthiness. 

The Central Bank has further informed me that it has been necessary to put lending restrictions in place in credit unions where there are regulatory concerns and resultant risk to members' savings. The majority of lending restrictions in place enable credit unions to lend amounts in the range of €10,000 to €30,000 and these are reviewed on a regular basis to determine whether or not they are still set at appropriate levels.

In February 2015 the Central Bank commenced a lending restriction review initiative, whereby credit unions that are subject to a lending restriction, but are satisfied that they have made the necessary improvements and have embedded these improvements in robust risk sensitive lending practices, could apply for a review of their lending restriction. The closing date for receipt of applications to review lending restrictions under this initiative was 30 September 2015. 59% of those applications received have been reviewed by the Central Bank.  Of the applications which have been fully reviewed, 83% have had their lending restriction lifted and are now operating under the board's stated credit risk appetite. Approximately 40% of credit unions that applied, submitted their application in September. These applications are currently under review.

Currently approximately 39% of credit unions have a lending restriction compared with 52% at the start of the review process.

Separately, a pilot to test the effectiveness of a microloan scheme is soon to be launched and will run for six months.  The scheme involves offering people receiving social welfare payments small affordable loans from credit unions as an alternative to moneylenders.  A Personal Microcredit Implementation Group under the Department of Social Protection is progressing this initiative and over 30 credit unions from around the country are expected to participate.  The Department of Finance is represented on this group.  Loans will range from €500 - €2,000 in value and will be repayable over 6-24 months with loan repayments deducted automatically from the household budget scheme operated by the Department of Social Protection in conjunction with An Post.  The interest rate will be a maximum of 12% a year.

The Government's priorities remain the protection of members' savings, the financial stability of credit unions and the sector overall and it is absolutely determined to continue to support a strengthened and growing credit union movement.