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Apr 08 2024

CUDA comments on CBI Financial Conditions of Credit Unions Report

By News

Commenting on the ‘Financial Conditions of Credit Unions’ report, published by the Central Bank this morning, Kevin Johnson, CEO of CUDA (Credit Union Development Association) said “This morning’s report shows that lending is strong across the credit union sector, with a 12pc increase in loans for the financial year ended 30 September 2023. Loan growth has continued into 2024 and this is reflective of the huge demand for credit union loans and the increased ability of credit unions to meet this demand across multiple channels. Furthermore, thanks to legislative changes signed last February, we expect the scale of credit union lending to significantly increase in the coming months and years – because from September 2024, for the first time, credit unions will be able to offer a service or product such as a home loan to a member of another credit union – under a formal arrangement with that other credit union. For householders and aspiring homeowners, this means there will be greater access to fairer mortgages as credit unions will be able to refer mortgage applications to other credit unions should they not be in a position to provide a mortgage themselves. This effectively means that every credit union in the country will be able to offer mortgages. As a result of these changes, CUDA contends that total new credit union mortgage lending could reach €1 billion per annum by 2027, which could put credit unions in the top five mortgage lenders.

Furthermore, the Credit Union Regulatory Lending Framework review is ongoing in the Central Bank at present and is due to be published by the end of June. On foot of this review, we would hope going forward that further changes will be implemented which will permit credit unions to lend more.

While after falling to a seven-year low the last time this report was published[1], the slight increase in arrears captured in this morning’s report is a sombre reminder of the pressure that the increased cost of living has brought on people. Credit unions are very cognisant of this and continue to remain supportive of anyone who is experiencing difficulties.  We believe the low increase is testament to the competitive interest rates available from credit unions as well as the work that credit unions do with any customers who may run into difficulties repaying their loans.

This morning’s report also shows that there’s been an increase in reserves across the sector, with all credit unions reporting regulatory reserves that are comfortably above the required regulatory minimum. This is evidence of prudent financial management by credit unions – which in turn underpins member confidence and enables credit unions to expand on their service offerings and continue to win more of the mortgage and lending pie from the Irish banks and non-banks alike.”

 

ENDS

 

[1] As per Financial Stability Report for financial year to 30 September 2022, published in March 2023

Apr 02 2024

Credit Union Report Strong Mortgage Performance as borrowers seek out better deals

By News

CUDA supported credit unions on track to provide €150m of new mortgage offers this year – the credit union sector will exceed €250m

  • Average mortgage amount is €185,400
  • Average interest rate is 3.72%
  • Credit union mortgage lending should reach €1bn per annum by 2027

Credit unions on CUDA’s Mortgage Support Platform, SAM which the majority of mortgage approvals in the credit union sector, are on track to provide €150m or more of mortgage offers this financial year with the – a remarkable 18-fold increase in mortgage activity in just six years.

Total mortgage lending on the platform – a framework which allows credit unions to offer residential mortgages – already exceeded €70m in the first half of the current financial year for credit unions which commenced on the 1st Oct and will easily exceed €150m for the full year. This is up from €8.1m in 2018. An incredibly strong performance according to the platform’s half yearly results[1], which have just been published.

Other highlights of the results show that:

  • The average mortgage amount has almost doubled since 2018, increasing from €108,835 in 2018 to €185,474 in 2023 on an average property value of €341,700
  • The average mortgage term has increased from 18 years in 2018 to 23 years in 2023
  • Average interest rate is 3.72%

35% of borrowers are individuals with the remaining 65% couples

The SAM mortgage platform is a wholly credit union owned service which supports credit unions in achieving significant levels of mortgage lending. Currently, more than 25 credit unions are now providing mortgages through the platform and this is constantly growing.

Commenting on the new figures, Kevin Johnson, CEO of CUDA said:

“The phenomenal growth in lending is driven by an increased appetite for credit union mortgages as well as the increased ability of credit unions to provide mortgages. The demand from Members is clear, they want an alternative to the banks and Credit Unions are stepping up. For several years now Regulators have encouraged credit unions to grow their lending and it is testament to the dedication of credit unions to upskill and bring much needed competition to the market. As the figures show they are doing this in a prudent manner and growth in loans is reflective of their growth in capability.  Legislators have also encouraged credit unions to increase their lending and arising from the  legislative changes signed last February, in the last quarter of this year credit unions will be permitted to offer a service or product such as a home loan to a member of another credit union – under a formal arrangement with that other credit union. This effectively means that every credit union in the Country will be able to offer mortgages.

Experienced credit unions in this space are evolving from niche players to full participants in the mortgage market.  Today’s figures are indicative of the evolving confidence and risk appetite of credit unions as they gain more experience in providing mortgages.

The numbers reflect this very fluid and developing market for Credit Unions. The last financial year was the first full year in which SAM credit unions have offered fixed rate mortgages, and they have quickly taken root representing almost one quarter of total mortgage lending on the platform. And though green mortgages accounted for 6.5pc of total mortgage offers, this product is only emerging and currently only available from three credit unions on the platform, for those credit unions green mortgages account for 35% of their total mortgage lending”.

CUDA contend that as a result of the new legislative changes, we believe that total new credit union mortgage lending could reach €1bn per annum by 2027 which could put credit unions in the top five mortgage lenders.

Mr. Johnson concluded,

“There is already strong demand for credit union mortgages. With the support of CUDA’s Mortgage Platform, with more supports coming available in the near future and indeed even with every credit union in the country effectively being able to offer mortgages, we hope this will encourage the Central Bank of Ireland to extend the boundaries and facilitate credit unions provide even more home loans. Credit unions are trusted by consumers – in 2023, they topped the table for the best customer experience (the CX Customer Experience report) in Ireland for nine years running. Furthermore, credit union lending rates are particularly competitive as they are not impacted by elevated ECB rates. While the banks hold the lion’s share of mortgage lending in Ireland, with total mortgage lending for the banking sector reaching almost €11.4bn in 2022, credit unions have become and will continue to be a strong contender in the Irish mortgage market and are on track to win more of this mortgage pie from the banks in the coming years.”

ENDS

 

Notes to editor

SAM

SAM (System for Application Management) is a best practice framework for credit unions to offer consumer mortgages. As a wholly credit union owned service, the purpose of SAM remains to support credit unions in achieving significant levels of mortgage lending, delivered at a price point that will not erode their financial performance on a low margin product line.

SAM provides credit unions with optimised processes from application to assessment, documentation and a workflow management system that ensures a consistent approach and compliance with ESIS, MARP and other requirements.

SAM includes training and service support, access to CUDA’s legal and compliance services, and the option for external file assessment by an industry expert at discount rates.

Excellent member experience is ensured via streamlined processes, competitive rates and the personal approach which has made credit unions the most trusted brand in Ireland for many years running.

SAM was originally launched in 2017 and was upgraded in 2021. For more details, visit www.solutioncentre.ie.

[1] For the months Oct 1, 2023 to March 31, 2024

Mar 25 2024

CUDA Comments on CBI Financial Stability Note on the Consumer Credit Market

By News

The Central Bank today published their Financial Stability Note on the Consumer Credit Market, which provides some very interesting insights to the non-mortgage consumer credit market in Ireland.

Commenting on the overview report, Kevin Johnson, CEO of the Credit Union Development Association (CUDA) stated

“This morning’s report shows that credit unions collectively are the main lender for personal loan products. This is not a surprise to us – lending is strong across the credit union sector, particularly for home improvements and car loans. Credit union lending rates are particularly competitive as they are not impacted by elevated ECB rates. Credit unions are also very must trusted by consumers – in 2023, they topped the table for the best customer experience (the CX Customer Experience report) in Ireland for nine years running.

It is interesting that this morning’s Financial Stability Note from the Central Bank shows that demand for consumer credit has remained strong, despite the ECB starting to raise interest rates in 2022. The report also shows that the pass through of interest rate increases to new consumer loan rates has been more muted in Ireland than elsewhere in the euro area and we believe that the predominance of credit unions in the personal loan market is one of the main reasons for this.

This morning’s Note shows that the non-mortgage consumer credit market is a significant one, representing over one-tenth (12pc) of all household credit in Ireland.

It’s not surprising to us that one-third of consumer credit drawn down between 2020 and 2023 was to finance motor vehicles, and a further one-third was for home improvements. We would urge consumers however to be careful in their choice of motor finance. In our experience, the most popular car financing option is a personal loan from a bank or credit union. Personal Contract Plans (PCPs), a type of car finance available largely from car dealers, have also become popular in recent years. We would always advise consumers that their best option for car finance will depend on their own circumstances, but they should remember that under PCP or hire purchase agreements, they do not own the vehicle until they have made their final loan payment. This however is not the case with personal loans.

This morning’s note also finds that consumer credit loan arrears are declining at credit unions. This again we believe is testament to the competitive interest rates available from credit unions – and the work that credit unions do with any customers who may run into difficulties repaying their loans.”

 

ENDS

Feb 21 2024

Comment from Dr. Kevin Johnson, CEO of the Credit Union Development Association (CUDA), on key changes coming into force today February 21, 2024 as a result of enhancements to the Credit Union Act

By News

Credit unions processed approximately €200m in new mortgage lending in 2023. As a result of the legislative changes which came into force today, we anticipate this volume doubling each year for the next couple of years. We believe the credit union mortgage lending could reach €1bn per annum within 3 to 4 years which could put credit unions in the top 5 mortgage lenders.

For the first time, credit unions can now offer a service or product such as a home loan to a member of another credit union – under a formal arrangement with that other credit union. For householders and aspiring homeowners, this means there will be greater access to fairer mortgages as credit unions will be able to refer mortgage applications to other credit unions should they not be in a position to provide a mortgage themselves. This effectively means that every credit union in the country will be able to offer mortgages.

Credit unions can also refer applications for other products to another credit union – such as current accounts, debit cards, and business loans. Credit unions can now essentially partner with other credit unions to offer their members a wider selection of products.

This new collaboration on lending could generate an additional €2.2bn in lending each year for credit unions.

Credit union members will have more access to digital and automated services as a result of the enhancements to the Credit Union Act. This increased digitalisation will generate cost savings for credit unions in a number of areas. For example, the ability to make credit union annual reports available online will save credit unions an estimated €75m a year in postage and printing costs (see Appendix). All of these cost savings will then be used to deliver even better and lower-cost products to our members.

In addition, increased digitalisation will make it easier for credit unions to sign up new business members, and lend to these businesses– in this regard, we estimate that digitalisation will boost business lending alone by €100m a year.

The changes that come into force today (February 21, 2024) are just the first of a suite of enhancements to the Credit Union Act in the pipeline. Other changes in the pipeline are the establishment of credit unions for credit unions (aka Corporate Credit Unions) and the ability of credit unions to invest in shared services – these will help credit unions provide maximum efficiency for their members by sharing costs and expertise. This in turn will enable credit unions to offer a wider range of lower-cost loans and other products to their members, as well as more favourable returns on savings.

ENDS

 

Appendix

 

 

 

 

Oct 18 2023

CUDA welcomes the passing of the Credit Union (Amendment) Bill at Committee Stage

By News

Mortgage volumes to double each year and SME services to be available across the sector

Commenting as the Credit Union (Amendment) Bill passed at Committee Stage, Kevin Johnson, CEO of CUDA which works with 50 credit unions, said

”At a time when there is a significant housing challenge, a climate change crisis, a looming pension crisis and large-scale bank branch closures, CUDA believes that the Credit Union (Amendment) Bill will immediately deliver increased finance options for individuals, small businesses and for community organisations.

The new proposals will facilitate real collaboration between credit unions. Each credit union is a separate legal entity with its own board and management team, and up to now, they are not permitted to share business. These changes will permit credit unions to collaborate, introduce loans to each other and collectively share loans. They will be able to establish a credit union for credit unions and have greater opportunity to invest in credit union owned service organisations. These changes will help credit unions make a greater financial, social, and environmental contribution as their legislation framework is modernised.

For householders and aspiring homeowners, there will be greater access to fairer mortgages as credit unions will be able to refer mortgage applications to other credit unions should they not be in a position to provide it themselves. This effectively means that every credit union in the country will be able to offer mortgages. Credit unions will process approximately €200m in mortgages in 2023. Following the enactment of this legislation, we anticipate this volume doubling each year for the next couple of years. While the average mortgage interest rate across banks has increased significantly, it has actually decreased across the credit union sector.

For local community organisations seeking larger loans, there will be more access to affordable finance options as their local credit union will be allowed to co-lend and share loans with other credit unions.

For small business owners, it will be a lot easier for the business itself to qualify to become a member of a credit union and therefore access the ever-increasing range of products and high-quality award-winning personal service.

For all credit union members, the changes will allow greater digitalisation of activities to complement the renowned face-to-face personal service.

For the credit unions themselves, they will be able to invest in shared services and establish credit unions for credit unions – this will help provide maximum efficiency for their members by sharing costs and expertise.

Allowing credit unions to do more business through these changes, could effectively see their lending double, increasing to over €10bn.

We extend our sincere appreciation to both Minister Jennifer Carroll-MacNeill and her predecessor Minister Sean Fleming for their invaluable support and significant contributions in helping advance the credit union mission”.

Amendments to Credit Union legislation

Supporting investment in collaboration

Enhanced collaboration is central to the future of the credit union movement

  1. Proposal to recognise Credit Union Service Organisations (CUSOs) in the Credit Union Act as authorised investments;
  2. Proposal to introduce Corporate Credit Unions as entities through which credit unions can further collaborate.

Improving members services

Enhancing the Common Bond to ensure members can access the fullest range of services

  1. Proposal on the referral of members to allow for the introduction of members to other credit unions to access other services/products;
  2. Proposal to allow credit unions to engage in loan participation lending;
  3. Proposal to allow for credit unions to lend directly to certain classes of public bodies;
  4. Proposal to ensure that clubs, societies, and companies based in a common bond are members;
  5. Proposal to make an annual report available to members electronically, e.g. via the credit union website;
  6. Proposal that every credit union publish a digital map or provide a description of their common bond on their website and in their annual report,

Supporting improvements in Governance

Enhanced governance to enable boards to focus less on operational matters and more on strategy and business models.

  1. Proposal to enhance the role of the CEO in relation to the board by allowing flexibility to add the CEO as a board member;
  2. Proposal to amend the minimum number of board meetings from ten to six;
  3. Proposal to allow greater flexibility in requirements to review policies from an annual basis to every three years;
  4. Proposal to allow the Board to delegate loan rejection appeals to the executive team;
  5. Proposal to amend the language in legislation related to the responsibility for approving loans and membership – this will facilitate the use of modern technologies.
Oct 13 2023

CBI Public Statement: Update on Central Credit Register error

By News

The Central Bank of Ireland issued a public statement on 21 August 2023 in relation to an archiving error that affected the retention period of some information on borrowers’ credit reports held on the Central Credit Register (CCR). Today (13 October 2023) the Central Bank is providing an update on the matter.

As previously outlined, certain borrower information was retained on the CCR for up to an additional three months, and was available for inclusion in credit reports between 1 June and 7 August 2023. While the information was an accurate representation of what was previously reported by lenders, the additional three months of information should not have been held or made available in credit reports during this period. This constitutes a breach under data protection legislation.

The error was first brought to the Central Bank’s attention by a member of the public on 3 August. It was fully resolved by 7 August 2023, with the database reflecting the correct five-year retention period. Credit reports provided from 7 August 2023 do not reflect any additional information.

Once the error was rectified, the Central Bank focused on establishing any impact of this incident on borrowers. The main mechanism through which borrowers could be impacted is where the CCR contained information around loan performance over these additional three months, which may have adversely affected decisions by lenders to extend new credit or decisions by borrowers to seek new credit.

As the information held on the CCR is one of many factors that lenders use when making credit decisions, assessing the impact of this error has been a complex process. The CCR does not decide if a loan is approved or not, lenders make that decision. The CCR also does not calculate a credit score. Our assessment of the impact has required extensive engagement with 270 lenders to determine whether, and if so how, the additional credit information influenced their credit decisions.

To date, the Central Bank’s investigation has established that:

  • The records of 20,872 borrowers who had performance data pointing to repayment difficulties in May, June or July 2018 (the three additional months that should have been deleted as planned) were accessed by either lenders or borrowers.
  • These borrowers were associated with 31,013 enquiries by lenders (as borrowers may have made more than one credit application). Within that:
  • For 30,963 credit enquiries, lenders have confirmed that their credit decisions were not impacted by the excess data. There are a range of reasons for not being impacted, including lenders’ own lending policy and the timeframe that it considers.
  • For 9 credit enquiries, lenders have confirmed that the excess data was one of the factors which influenced their credit decisions. These enquiries related to personal loans and credit card products.
  • For 41 credit enquiries, lenders have not yet been able to confirm if there was any impact. The Central Bank continues to engage with lenders in relation to this cohort.
  • There were 820 borrowers who accessed their own report, which included information that pointed to repayment difficulties during the additional three months. The records of some of these borrowers were also accessed by lenders, as above.

A phased communication process is underway and the Central Bank has written to those identified as being at highest risk of being impacted by the error. All borrowers associated with applications where lenders have confirmed that the excess data influenced their credit decisions have been contacted. The Central Bank has engaged with the lenders to ensure that there is a contact point in place for impacted borrowers should they wish to discuss their previous application or re-apply for credit. The lenders have also confirmed the excess information previously received will not impact on any new applications.

In light of this incident and to strengthen controls in this area, the Central Bank is also initiating a broader external review of the data management and data protection controls in place with respect to the operation of the CCR.

The Central Bank has engaged with the Data Protection Commission (DPC) throughout this incident. We have received notification from the DPC of the commencement of an Inquiry into this breach. The Central Bank takes our data protection obligations seriously and will continue to engage fully with the DPC on these matters.

Vasileios Madouros, Deputy Governor for Monetary and Financial Stability, said: “The Central Bank of Ireland sincerely regrets, and apologises for, this error. While we have a range of controls in place in the operation of the CCR, it is clear they were insufficient to prevent this specific incident. This falls short of our own standards and we have implemented immediate measures to prevent this error from reoccurring. We are also commissioning a broader external review of data management and data protection controls in place when operating the CCR. The CCR is an essential service to enable better credit decisions by borrowers and lenders, and it is crucial that we hold ourselves to the highest standards in operating it. We will continue to engage fully with the Data Protection Commission.”

Further information on how the Central Credit Register processes data can be viewed at http://www.centralcreditregister.ie/. Our public contacts helpline can be reached on 0818 681 681. Borrowers can request a copy of their credit report through the CCR website.

Further information

Media Relations:  media@centralbank.ie

Ewan Kelly: ewan.kelly@centralbank.ie / 086 158 7094

Sep 05 2023

Bizfin – CUDA Credit Unions partner with Government in Ukraine Credit Guarantee Scheme

By News

Credit Unions support local businesses impacted by the economic consequences of the conflict in Ukraine by partnering with the Department of Enterprise, Trade and Employment (DETE) on the Ukraine Credit Guarantee Scheme

 

The Credit Union Development Association [CUDA], launched its Small Business Lending solution for credit unions to offer business loans to SMEs, ‘BizFin, Smart business finance, made simple’ in early 2021.

CUDA announced today that two of its large credit unions, Capital Credit Union and Credit Union Plus, with a combined membership of over 100,000, are now successfully partnering with Government in the low-cost Ukraine Credit Guarantee Scheme through BizFin. CUDA believes that credit unions will succeed in working with micro, small & medium sized businesses, adversely impacted by the conflict in Ukraine who are facing supply chain disruptions and increased input (including energy) costs.

Credit unions believe that SMEs have faced challenging trading conditions for over 3 years, which may have led to a sustained lack of investment, while necessary at the time, could have a detrimental impact on competitiveness.  The expectation is that as the economy gets back on its feet, lending should also grow.  Economic forecasts for the Irish economy remain positive [1]and lending will be required as part of SME’s capital investment strategy to fund expected growth.

The clear benefit for Credit Unions on partnering on a Credit Guarantee Scheme, is they are in receipt of an 80% Guarantee from the SBCI /or the Department of Enterprise, Trade and Employment, enabling them to offer competitively priced loans to their business members.

CUDA acknowledge that credit unions, who were again voted most trusted organisation in 2023 are more involved in their local communities, a consequence of which is more local businesspeople will be willing to sit down and discuss the merit of them participating in this scheme.

Kevin Johnson, CEO of CUDA commented, “

“As the trusted provider of financial services in communities throughout Ireland, we believe that many sole-traders and small business owners will feel more comfortable dealing with credit unions, particularly where they can receive a fast answer to their credit application. Many of these solid businesses are struggling due to high increase in costs, particularly energy costs and are now at a point where they need to review their working capital to ensure they are well positioned for the future.

We have designed the standalone business website, Bizfin.ie, to support this initiative which will be accessible to all business customers of the participating credit unions. They will be able to apply for business loans as well as apply for credit union membership via this site.”

Ends

  

About Ukraine Credit Guarantee Scheme

The Ukraine Credit Guarantee Scheme is offered by the Department of Enterprise, Trade and Employment to provide viable SMEs, including primary producers, impacted by economic challenges arising from the conflict in Ukraine with access to low-cost finance.

The scheme supports economic activity in Ireland, facilitating the provision of working capital and medium-term investment finance to businesses adversely impacted by the conflict in Ukraine who are facing supply chain disruptions and increased input (including energy) costs.

Borrowers will contribute to the cost of the scheme by paying a risk premium on the credit advanced. This premium will be incorporated into the margin on the loan, collected by the on-lender and paid to Government of Ireland.

 Loan Features

  • Loans from €10,000 to a maximum of €1,000,000 / €400,000 for BizFin Credit Unions, per borrower (subject to Loan Amount Criteria, see below for further details)
  • Repayment terms of between 3 months up to 6 years
  • Eligible financial products: term loan facilities.
  • Loan amounts less than €250,000 will be unsecured.
  • Amounts greater than €250,000 may be secured; however, a personal guarantee may only be sought in circumstances where it is required to capture supporting security, or where it is an uncollateralised personal guarantee and is limited to a maximum of 20% of the initial finance agreement amount.
  • Up to 90 days interest and/or capital moratoria are possible under the scheme. These remain at the discretion of the participating on-lender.
  • Loans will be available up to the 31 December 2024 or until the scheme has been fully subscribed.

 Eligibility Criteria

Borrowers must self-declare that:

  • Their costs have increased by a minimum of 10% on their 2020 cost figures due to the impact of the conflict in Ukraine.
  • Finance is being sought specifically as a result of difficulties being experienced due to the conflict in Ukraine and meet the specific criteria as set out in the Loan Purposes section.
  • Finance is being sought for a new loan. Refinancing of existing loans is not

How to apply

Step 1 – Applicants must first register on the SBCI Hub and submit an online Eligibility Application Form to check if they can access the scheme. Once the online form is completed, successful applicants will be issued with an eligibility code.

Step 2 – The applicant must provide this eligibility code to the Credit Union to begin their credit application process.

Please note that the SBCI eligibility code is not a guarantee of credit approval.

 

About BizFin

This Business & Community Lending solution is an initiative that commenced in participating credit unions in 2021. These credit unions have a strong desire to serve other sectors of the credit union   membership, namely micro, small & medium sized enterprises, and community clubs & associations.

Our strategy is to deliver prudent high quality lending growth within our catchment area, by offering secured and unsecured longer-term lending.

This is achieved by having the necessary in-house expertise & staff, coupled with the close collaboration of contributing credit unions.

In BizFin we have developed a uniform & consistent approach, so that every applicant will have the same transparent, professional & personal experience in every participating credit union.

If you would like to know more about a business or community loan, including the Ukraine Credit Guarantee Scheme, visit BizFin.ie.

 

[1] European Commission Economic Forecast for Ireland May 2023[/vc_column_text][/vc_column][/vc_row]

Jun 26 2023

Customer-centered credit unions do not need rules made for bad bankers

By News

By Kevin Johnson, CEO of the Credit Union Development Association 

It’s about five years since the Central Bank of Ireland (CBI) published a report on behaviour and culture in the Irish Retail Banks 1 . That report found that the banks had significant work to do in order to ensure they were putting their customers first. This report paved the way for the introduction of new rules which should help consumers dealing with financial service providers in this country to be confident that their best interests will be protected 2 . The new rules should also ensure that financial institutions put consumers at the heart of their culture and decision-making. These rules, which are coming in under the Central Bank (Individual Accountability Framework) Act 2023 which was partially commenced April, are being planned for roll out by the end of the year.

These rules are long overdue for the banks. There have been a number of major banking scandals in recent years which has seen ordinary hard-working customers lose out. The tracker mortgage controversy – which saw tens of thousands of customers being overcharged by their lenders when they were wrongly denied a tracker rate and moved onto a higher interest rate – is one of the more recent ones.

It will involve a considerable amount of time for the banks to adapt to these new rules but given their track record, it is imperative that they do so.

Credit unions however are another case in point. Credit unions are already putting consumers first and have been doing so since they were established. Evidence is there to support this. Irish credit unions have consistently topped the customer experience league table since 2015, when the CX Company, which is behind that table, began its annual survey. Credit unions are also highly regarded by the public, coming out tops on reputation in a study published earlier this year. The study, known as the Reputations Agency Ireland RepTrak study, measures the level of trust, respect, admiration and esteem the public has for 100 organisations in Ireland. Credit unions had the highest score in that study this year.

Credit Unions consistently do well in these surveys because they continue to operate under a culture and ethos of putting their members, or consumers, first. This ethos is enshrined in credit union legislation which safeguards the economic, social and cultural well-being of its members as well as their communities 3 .

The Central Bank is planning to bring credit unions within the scope of the new rules being rolled out under the Individual Accountability Framework. This is disproportionate and unwarranted. It will burden credit unions with an extra layer of unnecessary regulation and costs. Credit unions are already meeting appropriate standards set out in law and regulations.

It was the poor behaviour of banks – not credits unions – which led to the development of the Individual Accountability Framework rules. So why is the Central Bank planning to roll the rules out to credit unions? Target rules correctly and they should achieve their aims. But for credit unions this will be rules for the sake of rules and this never works. Neither in this case will a one-size-fits-all approach. The Central Bank needs to differentiate between banks and credit unions.

The Central Bank has not taken into account the cooperative credit union model that helps differentiate credit unions from banks and investment firms.

Sometimes the cooperative credit union model is dismissed as being of a ‘Corinthian spirit’ – meaning that it is like an enthusiastic amateur, suggesting that a sector governed by volunteers could not be as good as one with remunerated leaders. At CUDA, we strongly disagree with that interpretation as we see the volunteer as providing a professional service pro bono. Furthermore, these volunteers are supported by a team of professional managers and staff.

Rather than bringing credit unions under the scope of these new rules, the Central Bank should seek to understand what makes credit unions so exceptional in this regard. Rather than trying to incorporate credit unions and swamping them with further costly requirements, the Central Bank should seek to understand their motivation, as this is what drives outcomes. To borrow a line from St. Paul to the Corinthians, “the fact that there is only one loaf means that, though there are many of us, we form a single body because we all have a share in this one loaf”. Credit unions share that loaf with their members and are clearly on the side of the consumer. Why fix something that’s not broken?

1 Behaviour and Culture of the Irish Retail Banks July 2018

2 See release from the Department of Finance in April 2023.

3 Credit Union Act 1997, Section 6(2)

 

Opinion piece on the Individual Accountability Framework, published in the Irish Independent the weekend 24th June 2023

Mar 30 2023

CUDA comments on the CBI Report on Financial Conditions of Credit Unions

By News

The Central Bank of Ireland have today (30th March 2023) published its ninth edition of the Financial Conditions of Credit Unions Report.

Commenting on the Central Bank’s report on the Financial Conditions of the Credit Union sector, ‘Kevin Johnson, CEO of the Credit Union Development Association, which works with over 50 credit unions, said

“Loan volumes are up, and the loan-to-asset ratio is definitely improving, but not by as much or as quickly as we would like. We believe that there’s an absolute need to resolve this by expanding the loan profile of credit unions and prudently growing loan books across the sector.  

Competition in the mortgage market has reduced following the departures of Ulster Bank and KBC, and with the non-banks struggling to offer competitively priced products, there’s a clear opening for credit unions to substantially expand their mortgage products. CUDA has been at the forefront of this, with its members initially entering the mortgage market in 2018 targeting specific lending needs, since 2021 we have worked with credit unions to expand their offerings and we are now working to expand this to more credit unions. 

New legislation that is progressing through the Oireachtas and scheduled for enactment this year will support this, as it will allow credit unions to refer lending business to each other which means that even those credit unions without mortgage lending underwriting skills will be able to facilitate their members. 

Each credit union is a separate legal entity with its own Board and management team, and they are not currently permitted to share business. These changes will help credit unions make a greater financial, social, and environmental contribution as their legislation framework is modernised.

Credit Unions have significantly modernised in the past decade – their structure, legal and regulatory status, product offerings, and service delivery methods have advanced considerably. In particular their digital capabilities were accelerated during the Covid-19 pandemic. Members can still access the traditional set of personal loans and savings, and now they can also avail of current accounts, ‘one stop shop’ retrofit loans, mortgages, revolving credit, debit cards, community loans, agricultural loans, as well as loans for small businesses.  These are accessible face to face, over the phone or via online facilities.  Recent rises in interest rates will have a significantly positive impact on the ROA for all credit unions as this will result in them getting a better return on their investments.”