Finance Minister Brian Lenihan has announced the extension of longer-term lending limits for credit unions.
The move addresses the need for credit unions to be in a position to facilitate rescheduling of loans and is intended to allow credit unions help members who are having financial difficulties continue to make repayments - albeit reduced payments - on their loans.
The extension, under Section 35 of the Credit Union Act 1997, requires an amendment to the bill and is provided for in the Central Bank Reform Bill 1010, which the Government published today.
The amendment will extend the lending limit for loans over five years from 20% of the credit union's total loan book to 30%. It will also empower the Registrar of Credit Unions to impose requirements on credit unions in relation to lending practices and also requires credit unions to have appropriate systems in place to monitor compliance with the act.
'Many credit union members are experiencing difficulty in meeting loan repayments due to unfavourable changes in their financial circumstances in the current economic environment,' commented Finance Minister Brian Lenihan.
'Increasing the lending limit for credit unions and formalising arrangements in the area of rescheduling of loans will facilitate credit unions in their wish to ease the position of these members,' he added.
Kieron Brennan, CEO of the Irish League of Credit Unions said the new arrangement is good for credit union members and good for credit unions.
'Whilst recognising the benefits that this announcement will bring to credit union members and ILCU affiliated credit unions, there are also conditions attached to rescheduling of loans, certain provisioning against bad debts and particular liquidity levels must be maintained, he said.
He also said there are clear definitions of what constitutes a rescheduled loan. All applications must be supported by appropriate fact finding and loans can only be rescheduled in agreement with the member, he added.
