The board of the Irish League of Credit Unions voted unanimously at the weekend to reject a new pilot scheme from the Central Bank aimed at easing the burden of stressed borrowers.
The decision to formally reject the Central Bank move to tackle mortgage arrears comes after months of negotiations with the regulators involving banks, credit card providers and credit unions.
A statement from the Irish League of Credit Unions said that many of the concerns it raised in regard to the proposed framework were ignored at these talks.
''These discussions have offered little in the way of meaningful relief to distressed mortgage holders and as a result the ILCU Board has voted unanimously to withdraw from the process,'' the statement added.
It also said that it will not recommend the pilot proposal to its 383 affiliated credit unions in the Republic of Ireland.
''A major flaw with this framework from the outset has been the absence of provision for mortgage write-off or write-down which is an essential element of any plan to give meaningful relief to those in unsustainable debt situations,'' the credit union statement said.
It added that credit unions would be willing to participate in a scheme that gives ''real relief'' to members in distressed mortgage situations. But it said it refused to facilitate the banks in ''bleeding distressed borrowers who would receive no permanent relief as a result of this framework''.
''The framework is clearly written with the intention of protecting the banks’ capital positions and maximising their income from mortgage interest payments. It does this very effectively at the long-term expense of the borrower,'' today's statement concludes.
Speaking on RTÉ's News at One, Irish League of Credit Unions chief executive Kieron Brennan said the league had called for burden sharing, including debt write downs by the bank.
However, Mr Brennan said that this was rejected by the banks. Under this proposal the burden has merely been temporarily suspended, he added.
Mr Brennan said he is concerned that the banks look to use the pilot proposal as an alternative to insolvency, which could deliver relief to the borrower.
He said that credit unions were more than willing to "take a hit for its members" who are in distress.
The Central Bank scheme, which was announced last week, would see priority being given to repaying mortgages, with a deal sought on how much of a household's leftover income would repay credit union loans and credit card bills.
The bank said last week that the aim of the scheme was to achieve ''sustainable and fair outcomes'' without the need for people to enter the full insolvency process.