CUDA, and our Member Credit Unions, are following the COVID-19 developments very closely. We continue to monitor the latest advice from the Government and from the HSE, and want you to know that we have plans in place to ensure members continue to be able to access the services they need.
Survey – 3 out of 4 (77%) Consumers believe Credit Unions should compete more aggressively with Banks
CUDA believes that the new rules which aligns the volume of loans a credit union can issue to their asset size is fundamental, and could enable many credit unions to double or treble their lending in certain loan classes.
Credit unions can and should ‘take on the banks’, according to more than 70% of Irish adults in a recent survey, commissioned by CUDA and conducted by iReach. The majority (74%) of adults believe that credit unions could make a bigger impact and should collaborate to compete with the banks.
Kevin Johnson, CEO of the Credit Union Development Association (CUDA), commenting on the new rules issued by the Central Bank of Ireland today, said “Up until now the level of loans the credit union should give out was based on the percentage of loans already issued. This was holding credit unions back from providing more loans to support their members and their communities. Now the volume of loans will be based on a percentage of assets of the credit union. With an average of just 28% of assets currently lent out, the Regulations will allow many credit unions to do more loans for more people.
CUDA has persistently lobbied for these changes since 2015 and are delighted that these changes will bring much needed competition to the market for mortgages, home renovations and business loans”.
“We look forward to providing the wider range and higher volume of loans now permitted under the new rules and welcome the Regulator’s commitment to re-evaluating these limits as the sector evolves in these areas of lending. In particular CUDA believes credit unions are ready and willing to help do more in filling the void for business loans left by the banks”.
Kevin Johnson went on to express disappointment that credit unions will be prohibited from supporting aspects of Government Housing Policy such as the Repair and Leasing Scheme. There is no logic, he said, to prohibiting credit unions from providing much needed loans to their members who want to help rebuild Ireland through the Repair and Leasing Scheme. Kevin further expressed disappointment with the limit on the number of business loans a credit union can do in a time when many credit union members who are small businesses are crying out for funding.
CUDA is committed to getting solutions to these issues and will speak directly with the Department of Finance, Department of Housing and the CBI on these matters.
Kevin concluded, “It’s very encouraging to find that 59% of people aged between 18-34 either agreed or strongly agreed with the perception of credit unions being ‘dynamic and innovative’. We have made huge effort and investment in recent years to develop our work in line with advances in technology through our innovation hub, the Solution Centre. In the past three years we have introduced new lending products and these new limit rules from the Central Bank will allow us help credit unions further develop. Our Digital Marketing adverts reached 2.74m people so far in 2019, creating over 18,000 loan leads with a value of €102m. We are committed to broadening the appeal and relevance of the credit union movement among younger generations, and to making our services as accessible as possible, to as many members as we can, both old and new.”
-ENDS
Pictured at the launch R – L Kevin Johnson, CEO CUDA, Seamus Newcombe, CEO Payac, Brian Corr, Dept. of Finance, Des Morrissey, Chair CUMA
CUDA was delighted to be invited to attend the launch of the a new full-service Current Account for Credit Union members. It includes a globally accepted Mastercard Debit Card with contactless payments, standing orders, direct debits, and an overdraft facility. Credit Union members will be able to open an account online or in person at a Credit Union branch.
The roll-out of the new service commenced 17th October ’19 and sees 30 Credit Unions, with 115 branches throughout the country, offering this new service over the coming weeks. Further Credit Unions are expected to provide the service in 2020.
The Current Account offers simple and transparent pricing including a low monthly (standard) fee of €4, which covers unlimited (euro) point of sale and contactless transactions, unlimited mobile and online banking, unlimited standing orders and direct debits, and up to five ATM withdrawals (euro) per month.
CUDA wishes the participating credit unions, and their owned shared services company Payac Services who have colloborated successfully to bring currentaccount.ie to market, every success
with this initiative. At CUDA we understand the benefits of collaboration to enable credit unions to engage in beneficial activities which would not have proved possible to do as single stand-alone entities. CUDA, through the Solution Centre, enjoys managing a variety of solutions within its network to their mutual benefit.
Hundreds of thousands of credit union members throughout Ireland will have access to a new home improvement funding scheme from early May, as the Solution Centre* in conjunction with the SEAI** and REIL*** roll-out its ‘Pro Energy Homes Scheme’
“Rapid growth in Credit Union lending expected to continue as Solution Centre rolls out enhanced Credit Union Business Model”
Responding to today’s launch of the Joint Committee on Business, Enterprise and Innovation’s Report entitled “ The Cost of doing Business ” and last week’s decision by the Department of Rural and Community Development and the Department of Finance, not to support the establishment of a new local public banking system, CUDA (Credit Union Development Association), the representative and lobby group for Ireland’s largest credit unions, said that its 48 strong network of the more progressive credit unions can fill this void and provide the much needed competition to the banks.
Speaking at the launch today, Kevin Johnson, CEO of CUDA, which is also behind the Solution Centre – a collaborative initiative that supplies product development and business supports to the Credit Union sector to enable them to lend to non-core sectors,
“We welcome the excellent work of both Joint Committees and their recognition that the cost of doing business, particularly the cost of borrowing needs be brought down, and that priority should be given to working with the existing framework provided by credit unions and An Post networks nationwide. Credit unions are already playing an increasing role in the Irish retail financial sector and CUDA anticipates working closely with the Central Bank of Ireland to expand the product and services that credit union branches throughout the country can offer individual and business members.
While having enjoyed strong lending growth in 2017, our 48 member credit unions are forecasting rapid growth in 2018 & 2019.”
CUDA say that it has taken a leadership role in lobbying for and developing the changes that are essential for credit unions to meet the demands of the current financial landscape. Through the Solution Centre, they have introduced new products, and implemented new processes and systems that will deliver the benefits that the advocates for public community banking are seeking.”
Mr. Johnson continued,
“Credit Unions have the lending capacity and are developing the expertise to take an enhanced role in relation to lending to SMEs. In tandem with the accompanying management and advisory support structures offered by the Solution Centre, numerous credit unions throughout the country could provide loans to SME’s, say up to €75,000.”
Mr. Johnson concluded,
“Credit unions can be at the financial heartbeat of our indigenous economy and can create a platform for rural revival, and indeed urban stimulation. With 268 credit unions and billions of euro currently available to lend, credit unions are very well positioned to deliver this service.”
Ends
Note to the Editor
The Solution Centre
A group of the country’s strongest credit unions established the Solutions Centre, a FinTech facilitated by CUDA, which supplies product development and business supports to the Credit Union sector and has embarked on an ambitious business transformation programme for the sector, of which mortgages is just one milestone.
Rather than simply replicating the actions of banks, the Solution Centre believes that credit unions have the flexibility and adaptability to quickly adopt new ways of doing business that will see a re-building of their market share. Credit Unions participating in our digital loan marketing programme have seen loan growth of 10-20% in a relatively short space of time, with minimal investment. It’s clear the movement’s leading credit unions have embarked on a transformative digital journey.
With 48 of the larger and more progressive credit unions, representing one third of credit unions members, coming together under the Solution Centre umbrella – we now have a structure to facilitate credit unions to achieve their goal of continuing as consumer-owned co-operatives, while delivering much needed new products and services to their members.
CUDA
CUDA, the Credit Union Development Association, was legally incorporated in 2003. In its early days it was the representative voice, on behalf of its owner member credit unions, with legislators and regulators. It has since evolved and now, as well as providing a ‘voice’, it is increasingly providing support facilities in the areas of regulatory compliance, risk management, shared services and competency development.
What’s uniquely interesting about credit unions is that the ‘problem’ is how to deal with, and build on, success. Credit Unions have approximately 3 million members, who continue to shrewdly save and have now amassed in excess of €12bn in savings. The challenge for credit unions is how to help their members who continue to build their ‘safety net’ through savings with a fair reward without putting these funds at risk – the latter of which is a shared objective with the regulator. Consistent with the objectives of the credit union, as enshrined in legislation, they also want to meet the borrowing needs of their members with a range of loans. This will ensure mutual benefit for savers and borrowers, by charging a fair rate to borrowers and paying a fair rate to savers.
Credit unions have embraced the enhanced governance framework, introduced in the Credit Union Act 2012 and subsequent regulations, at significant additional costs, but, as intended in the report by the Commission on Credit Unions, the quid pro quo of a more enabling tiered regulatory approach has not yet been delivered. It is worth noting that credit unions are more restricted now than prior to 2012 as a result of these new regulations – that’s not good for consumers, communities or their credit unions.
So what’s the way forward? There are several actions that can be taken to ensure the uniqueness of the credit union model is recognised by decision makers, while credit unions themselves can continue to evolve their capabilities;
While CUDA will relentlessly continue to seek actions 1 to 4 above, action 5 means that credit unions offering a full range of financial services, from personal loans, mortgages, payments, investments, insurance and pensions, is now closer than ever before. We are seeing a rapidly increasing level of cooperation between credit unions, which initially focused on shared management service arrangements such as regulatory compliance and risk management, but has now expanded to significant projects supported with full risk analysis to enable a more expedient regulatory approval process facilitated through the formation of the Solution Centre, a hothouse unit developing specialist products, supports and solutions for credit unions and now has membership of credit unions who manage over one third of the assets of the sector.
Credit Unions who share the desire to develop their business model are collaborating through the Solution Centre and are starting to deliver a stronger and more forthright sector. This is good for consumers on so many levels – apart from ensuring fair interest rates and fees in the market, it allows people to be part of a highly-networked community focused on economic, social and environmental change.
It’s already working because initiatives are fully thought through; for example, in the case of the new mortgage support offering, a full assessment of all the steps in the process was completed and those credit unions utilising this resource will have ongoing access to specialist expertise. This should give confidence to regulators to extend the limits under which all credit unions currently operate.
Credit unions working together have the desire and the skill-set to develop and to become a real alternative to banks and other finance houses. Credit unions have approximately €4billion out in loans, which is less than 30% of their assets, ideally this should be closer to 70%. This means they have a staggering €6bn available to lend.
So, what does all this development mean for credit union members? Anyone who joins will get improved, better tailored financial services in terms of mortgages, personal lending and savings, while also participating in a unique relationship with their credit union. While members are often aware of how dependent they are on their credit union, it is actually an interdependent relationship. In practical terms, credit unions will improve their communications to ensure that members appreciate the co-dependent benefits of doing business with their credit union, and will not want or need to go elsewhere for their financial services.
Kevin Johnson
Chief Executive Officer
Credit Union Development Association
CUDA welcomes CUAC report
“Modernising Credit Union Lending rules will deliver real value in mortgages and personal loans”
The representative body for Credit Unions CUDA has welcomed the publication of the CUAC report which reviewed the implementation of the recommendations in the Commission on Credit Unions.
Commenting on the findings, Kevin Johnson, CEO of CUDA, “The report highlights the long overdue need to review the current credit union lending limits. Modernising these will deliver better value for consumers in personal loans, mortgages and other financial services areas, something that the Government acknowledges is sorely missing in our economy.
We are also pleased to see our call has been listened to – we have long been advocating for a change in the outdated long-term lending limits to more accurately reflect consumer demands and the current financial environment”.
CUDA has also strongly campaigned for changes to be implemented that will allow Credit Unions to immediately provide funds for social and affordable housing, thereby helping to meet the serious supply problems facing prospective home buyers.
Kevin went on to explain, “Fundamentally, Credit Unions offering a full range of account and financial services, from personal loans to mortgages and savings to pensions, will drive greater competition. This will lead to lower cost products which can only be good for all consumers and which is all but absent from the market at the moment. We look forward to working with the proposed Implementation Group to make this a reality.”
The representative body say that an aspect of the report that struck them was that “the need for leadership at the centre and an understanding of the risks involved in longer-term lending were flagged by the Central Bank as areas of concern for credit unions seeking to move in this direction.”
Kevin commented, “This is something we are firmly behind and we have made great strides in this regard with the establishment of the “Solution Centre” which facilitates collaboration, innovation and business development”.
The Solution Centre, which is open to all credit unions, comprises a selection of the country’s strongest credit unions and is a hothouse unit developing specialist products, supports and solutions.
Kevin went on to say, “We have already delivered a number of projects that were drawn from the objectives of participating Credit Unions strategic plans. One of the first of these products will be supporting a mortgage offering which is expected to be available in August to participating credit unions representing approximately 25% of credit union members”.
CUDA says the report also correctly acknowledges the great work of all stakeholders which is resulting in ever strengthening Credit Unions.
Kevin concluded, “We thank the CUAC for the thoughtful consideration they have given to our proposals. Credit Unions continue to grow their market share of the consumer loan market and, now with strong capital, stronger governance and greater capabilities, they are fantastically positioned to broaden the range of services they offer to current and potential members”.
The Credit Union Development Association (CUDA) intend to present its submission to the Central Bank of Ireland ahead of its review of its macro prudential mortgage measures, in which it will call for three simple but equitable changes to the current rules for new mortgages.
At the same time, CUDA is seeking to have the long-term credit union lending limits removed or substantially changed as it believes that they are unduly restricting competition in the mortgage market. The representative body says that Credit Unions are massively under lent with billions of Euro currently available. They contend that delivering greater competition to consumers could finally see standard variable rates (SVR) drop below 3%.
Presently, credit unions are generally only allowed to lend 10% of their loans, on terms of 10years or more. CUDA believes that this rule should be removed as there are plenty of other prudential regulatory controls in place to ensure the solvency of those credit unions that wish to lend more over the long-term.
Lending a greater proportion of funds over a longer period would also enable credit unions to offer enhanced long-term savings products with higher interest rates.
Mortgage rules review
CUDA is calling for a change in the Loan to Income (LTI) limit which currently stands at 3.5 times. The Credit Union representative body will ask the Central Bank of Ireland (CBI) to allow for a slight increase in the LTI – to allow people borrow up to 3.75 times their income. The Solution Centre, a CUDA managed innovation business unit, has researched the issues in anticipation of a new mortgage offering and believes that this relatively small change could significantly boost the number of couples on average income that qualify for a typical starter home particularly in Dublin where prices are so much higher.
A new starter house in Dublin typically costs €300,000 and most people reasonably assume that first time buyers will need a €38,000 deposit under the Loan to value (LTV) rules – 10% up to €220,000 and 20% on the balance. But even assuming a higher than average household income of €70,000, the current LTI of 3.5 will mean that they will need a much bigger deposit of €55,000 regardless of whether they qualify for the lower First Time Buyer exemption under the LTV rules. If the LTI is raised to just 3.75, this would reduce the deposit required to €37,500 which is still a sizeable deposit, however it is more comparable with the €38,000 LTV deposit requirement.
CUDA’s submission will also suggest that the categories of First Time Buyer (FTB) and Trader-up (TU) should be changed to reflect the financial environment in which we currently live. They contend that when these phrases were first coined, it was assumed that while applicants might have had savings, FTBs didn’t have any equity from a previous home while TU’s always did. So the rules were softened for FTBs to give them a better chance. Unfortunately, many families in their 30s, 40s and 50s are now in the TU category – looking to trade up to a bigger \ family friendly house, however, having bought just before the downturn, they don’t have any equity to carry from their current home. CUDA is advocating that buyers should instead be categorised by ‘Equity’ and ‘No Equity’.
CUDA also believes that the mortgage lending limits in Dublin and other large urban areas need to reflect that it is a wholly different market to the rest of the country, with much higher purchase prices and far higher rental prices.
According to Kevin Johnson, CEO of CUDA, “we know the demand is there, but many people cannot meet the new rules because of Loan to income (LTI) rule. While Loan to value (LTV) limits are spoken of far more in the media, we believe that a small modification to the LTI rule would have a bigger impact without causing an undue spike so as to avoid any significant pressure on house prices.
The loan caps have had the, perhaps unintended, but negative consequences of forcing more and more people to remain in rental accommodation in big cities particularly Dublin which is putting upward pressure on rental rates. The increase in rents has been a significant contributor to the homeless crisis as people on rent support or supplement are unable to compete with the private sector for increasingly reducing number of properties. CUDA believes that the current Central Bank rules are contributing to slowing the migration of people from rental to purchase, which is having a knock on impact on everyone else in the rental sector.”
Credit Union Mortgage lending limits – Competition
CUDA is also engaged in a campaign to have the outdated long-term lending limits reviewed and modernised to more accurately reflect consumer demands and the current financial environment.
According to Kevin, ‘We believe that Credit Unions shouldn’t be unreasonably prevented from delivering competition to drive down mortgage rates. The current credit union limits are arbitrarily capped at 10% of all lending, a crude measure introduced many years ago that is now out of date. The Central Bank has indicated its desire to see more completion in the mortgage market; we believe that this is the best way to achieve it.’
CUDA
CUDA, the Credit Union Development Association, was legally incorporated in 2003. In its early days it was the representative voice, on behalf of its owner member credit unions, with legislators and regulators. It has since evolved and now, as well as providing a ‘voice’, it is increasingly providing support facilities in the areas of regulatory compliance, risk management, shared services and competency development.
The Solution Centre
A select group of the country’s strongest credit unions led by the CUDA established The Solutions Centre, a hothouse unit developing specialist products, supports and solutions. One of the first of these products will be supporting a mortgage offering which is expected to be available in July to participating credit unions representing approximately 25% of credit union members.
The CUDA Training and Development Programme for 2016 includes a number of targeted areas for Boards of Directors, Board Oversight Committees, Management Teams and Credit Union personnel. All of the programmes are devised collaboratively between CUDA and experts in the field to ensure the content is specifically designed to support Credit Unions in the current challenging environment.
CUDA encourages participation from both member and non-member Credit Unions at all training events, thereby providing a valuable opportunity for networking and knowledge sharing. Leadership development for Boards of Directors, Board Oversight Committees and Management Teams, all mandatory training requirements and training events specifically designed for Credit Union Staff are all included in the 2016 CUDA Training and Development Programme.
The 2016 CUDA AGM and Conference took place in the Slieve Russell Hotel Golf & Country Club, Ballyconnell, Co Cavan on Saturday 30th January 2016. It was yet another exciting and informative event, with participation from numerous credit unions. Speakers on the day included Minister for Arts, Culture and the Gaeltacht, Heather Humphreys and the Registrar of Credit Unions, Anne Marie McKiernan.
If you would like further details on the conference, please email info@cuda.ie or call the CUDA office on 01 4693715.
