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Aug 08 2022

Credit Unions – The Member-Owned Alternative

By News

As I look out the window, I see a spider working diligently weaving a web – busily performing its modus operandi for subsistence. I can’t help drawing the analogy to the headlines dominating the business pages of the media in recent weeks, which highlight how domestic banks will see significant increases in their profits as Central Banks increase interest rates. The source of these profits will be the unwitting consumer, a bit like the unsuspecting prey of the spider. And banks, like the spider, do what’s inherent in their DNA and in the case of banks it’s to maximise profit.

Ireland faces multiple complex and overlapping pressures including economic shock, climate change, housing, wealth inequality and the growing pension challenge. We can add facing into a winter of increased inflation where the cost of living, energy in particular, is soaring. This is a consequence of sanctions having to be imposed following atrocities committed by the Russian army and their inhuman siege of parts of Ukraine.

There is no doubt that people here in Ireland have changing financial requirements arising from trying to cope with the impact of these events. As two banks exit our national market, some consumers are even required to find a new provider. Reducing the level of competition is likely to lead to even less ‘positive’ product and service innovation as witnessed with the intent of a remaining bank to withdraw cash services, and the reversal of that decision is now likely to see increased charges to keep the promise of maintain branches and related services.

One provider that can help people is the credit union. Credit unions are member-owned, not- for-profit financial intermediaries. Their members have the dual role of owners of the credit union and consumers of the products and services it provides. Membership has grown consistently and the credit union brand remains the most trusted in Ireland as they continue to deliver the best consumer experience in Ireland.

Credit Unions have significantly modernised in the past decade – their structure, legal and regulatory status, product offerings, and service delivery methods have advanced considerably. Members can still access the traditional set of personal loans and savings, and now they have current accounts, ‘one stop shop’ retrofit loans, mortgages, revolving credit, debit cards, community loans, agri loans and loans for small businesses. These are accessible face to face, over the phone or via online facilities.

Staff in credit unions are highly trained as well as being renowned for their helpful approach to all members. They live the guiding principle of “Not for profit, not for charity, but for service” which has remained constant since the founding of credit unions.

What does that mean for people, small businesses and communities in Ireland?

  1. First and foremost is ownership. A credit union is owned by its members. In addition to being a non-profit, credit union operations are set up to benefit you as a member.
  2. Second is the focus on the financial well-being of their Credit Unions are not built to sell you products. They are built to help you succeed financially.
  3. Thirdly, is the availability of credit union Credit Unions were built to help you in good times and difficult times. Whether you have the opportunity to improve your lifestyle or unfortunately face an unexpected downturn in circumstances, such as impact of rapid inflation, you can visit, call or deal on-line with your credit union to discuss ways to find the right solution for you.

At CUDA we do believe credit unions present an underexploited opportunity and could play an even more supportive and leading role in addressing many of the challenges faced by Irish people. There is a genuine desire to support local communities by providing access to products, services, guidance, and advice. In turn there needs to be legislation and regulation that is supportive of such development.

As part of the Programme for Government, the Minister of State at the Department of Finance, Sean Fleming TD, and his department have worked with the sector to identify enhancements to the Credit Union Act 1997 [as amended] that will contribute to enabling credit unions tap into this opportunity. It’s a great start, as the promised new legislation will help credit unions further develop by allowing them to work more closely together, in a manner that they can’t legally do today. Under the new proposed legislation, credit unions will be able to introduce business to each other and co-lend to allow them pool expertise and capital. This in turn will enable them to support an even greater number of members through good times and tough times.

The Central Bank, through the Registrar of Credit Unions, is equally crucial for this needed reform, by ensuring that the regulations required to enable the legislative changes are put in place immediately. Last month the Basel Committee on Banking Supervision published their ‘High-level considerations on proportionality’. It is this type of action we need for credit unions in Ireland to guarantee a level playing field exists, in particular that appropriate and proportionate levels are set for liquidity, for capital requirements, and greater flexibility permitted to lend in the various categories – including fostering the ability to lend more to local businesses, farmers, local clubs and community projects.

Such enhancements will increase credit unions confidence and encourage even greater collaboration as they strive to act nationally and deliver locally.

If Ireland is serious about having a competitive banking landscape, one that is underpinned by Government policy that ensures financial services are for everyone in our society and operated in a manner that fosters public and social interests, then it is essential that these changes urgently are implemented.

Critically, credit unions have a much broader remit than banks – credit unions deliver key banking and financial services to people for a social as well an economic purpose. Unlike the spider and the bank who seek to maximise their returns, credit unions exist to optimise benefits for their members.

Contact your local credit union to experience how your needs and expectations can be met.

 

Kevin Johnson

CEO, CUDA

Mar 10 2022

Credit Union bodies welcome engagement with Minister Fleming on proposals contained in Department of Finance Review of Credit Union Policy Framework

By News

The four credit union representative bodies – CUDA, CUMA, ILCU and NSF – met with Minister with responsibility for Credit Unions Seán Fleming and officials from the Department of Finance today, Thursday 10th March. At the meeting the Minister outlined a list of proposals contained in his Review of the Credit Union Policy Framework.

The proposals were summarised under five key objectives;

  • Objective 1: Recognition of Role of Credit Unions
  • Objective 2: Supporting Investment in Collaboration
  • Objective 3: Supporting Governance
  • Objective 4: Improving Member Services
  • Objective 5: Transparency of Regulatory Engagement

Minister Fleming spoke about the importance of credit unions growing their loan books and proposed a number of measures to assist credit unions in this regard. In particular, he proposed bringing forward legislation to enable credit unions to invest more easily in Credit Union Service Organisations (CUSOs). This would allow credit unions to pool their resources in delivering new loan products to their members such as mortgages and small business loans.  They will also be enabled to establish Corporate Credit Unions to facilitate mechanisms such as a central liquidity system.

The Minister also proposed a number of measures to allow credit unions to introduce members to another credit union where the referring credit union was unable to provide a certain loan product or service. He also proposed legislative change to allow credit unions to share a larger loan between them.

In relation to Governance, Minister Fleming recognised the important role volunteers play within credit unions, and has proposed that this be included in legislation. Further proposals would reduce the work load on volunteer Directors and Board Oversight Committees in the future.

Also included in the measures outlined by the Minister were proposals aimed at making regulatory engagement with credit unions more transparent through the establishment of a Service Level Agreement (SLA) between credit unions and the Central Bank.

Responding to the Minister’s proposals, the four representative bodies welcomed the opportunities for lending for credit unions. However, there was general consensus that the proposals do not go far enough in addressing the key area of regulatory engagement. They recommend strengthened formalised structures that would include the four bodies, the Central Bank and the Department of Finance. This key infrastructure would serve to identify existing barriers to lending and prevent future impediments to progress and service to members and communities. The bodies believe that further engagement in this area is needed.

Sep 27 2021

Credit Union Sector Levy Regulations 2021

By News

The Minister of State, Sean Fleming T.D today, 27th September 2021, issued a press release on the Credit Union Levies for 2021. Commenting on this Kevin Johnson, CEO of the Credit Union Development Association, stated:

We note that the Minister has decided to continue with the levies for Resolution and for Stabilisation at the previous years levels.  It is disappointing that the Minister deems it appropriate to continue to charge a levy for stabilisation as no financial assistance has been provided to credit unions under the Stabilisation Scheme to date and no applications for such support have been made by a credit union.

While CUDA continues to support the purpose of a stabilisation fund, we believe the fund has reached an optimum size and therefore the Stabilisation Fund Levy should be set at 0%.

Apr 16 2021

Consumers already switching to credit unions

By News

While the departure of Ulster Bank, the withdrawal of services by other banks, and now the possible departure of KBC will be upsetting for staff and customers at these entities and we sympathise with them, it is likely to be a positive milestone for credit unions.

Larger credit unions, most of which offer a comprehensive range of personal loans, SME loans and mortgages, current accounts, and excellent online facilities, have already experienced consumers switching from Ulster Bank. There is a trust issue between banks and some of their customers and while inertia has prevented many from leaving the banks, customers of these banks now need to make a decision as to who to bank with.

We believe the fact that more and more credit unions, working collaboratively, now have a full suite of products will play in their favour.  This coupled with their commitment to supporting local communities throughout the pandemic is why credit unions continue to see a strong growth in performance and have expanded their position as the ‘most trusted’ organisations in Ireland.

Oct 13 2020

CUDA welcomes budget increases for home retrofit grants, but incentivising homeowners to use a combination of grants, loans and savings could be key to success of retrofits

By News

“500,000 home retrofit target will not be reached unless the costs are affordable for average households, increases for SEAI grant schemes announced in todays budget are a very positive development but incentivising the use of surplus household savings may be an important piece of the puzzle”

·         Credit Unions are best placed to become primary source of finance for nationwide retrofit project

·         A Government commitment for community schemes throughout Ireland will create thousands of jobs & reduce fuel poverty in households

The Credit Union Development Association [CUDA], that currently runs Ireland’s first end-to-end home retrofit scheme – ProEnergy Homes, has welcomed today’s budget announcement of an additional funding for SEAI grant schemes and the acknowledgement by Minister Eamon Ryan that this will be delivered primarily through community organisations like credit unions. This announcement is a major achievement for the SEAI and allows them to build on the work they have been doing over many years.

In 2019, 25 Credit Unions nationally piloted the ProEnergy Homes scheme. Under this approach, a national project management firm (REIL) was appointed to oversee all surveys and works, grant funding of 35% was available from SEAI for all qualifying works and low rate financing was made available for the balance of costs through the applicant’s local credit union.  CUDA reported at the time that public demand for the scheme was enormous, demonstrating people’s appetite for a ‘one-stop-shop’ model.

Following a review of the pilot scheme, CUDA determined that while the public demand for this model is high, in order to meet the Government’s target to retrofit 500,000 homes and bring them to a B2 energy rating by 2030, analysing the affordability of retrofit projects for the average household will be vital.  CUDA say in their experience of running ProEnergy Homes, the average costs per household run to approximately €30,000 – €40,000 to bring homes to B2 energy rating. The most popular measures undertaken in 2019 were external wall insulation, new glazing. Multi zone boiler controls also proved very popular.

SEAI grants will fund a generous 35% of the costs, but many homeowners will still be left with a bill of roughly €26,000 for their retrofit. While many credit unions will offer preferential finance rates for home retrofits (around 6.9% unsecured or 4.9% when backed by shares); financing retrofits over 5 years will see repayments of around €500 per month, which is still out of reach for many middle-income families.

One possible solution could be to incentivise homeowners to use some of their savings to lower the costs of financing the works. Central Bank data shows that Irish households have saved an additional €10bn this year alone with household savings now standing at record levels. Encouraging homeowners to use some of their savings, say by toping up any savings used in a fashion similar to the Help to Buy Scheme, would make home retrofits much more accessible for the average family.

For example, with costs of €40,000 to get a home to a B2 rating, grants will cover €14,000 leaving €26,000 to be covered by the homeowner. If they have managed to build up some additional savings that they can use, say €10,000 and were incentivised to use these with a 10% or €1,000 top up, the amount to be financed falls to €15,000. Financing this over 5 years would see monthly repayments of around €295 which is very typical of average home improvement loan repayments for Irish households.

Using some of the savings they have built up would allow a homeowner not only to retrofit their home and take advantage of all the benefits that brings in terms of ongoing savings for home heating, home comfort and health, but would also significantly reduce the cost of credit for the portion of the costs being financed. Making retrofits more affordable and accessible for middle income families also brings major benefits for the broader economy as greater uptake of energy retrofits has the potential to create thousands of jobs over the coming decade.

While the cross-Departmental Retrofit Taskforce will develop a new long-term national retrofit delivery model, CUDA believes that several measures should be put in place immediately and have communicated these to Minister for Communications, Climate Action and Environment Eamon Ryan.

  1. Homeowners should be encouraged to use some of their savings toward the project rather than having to rely solely on credit.
  2. No group is better positioned than credit unions to support retrofitting plans in local communities across Ireland.
  3. There is a pressing need to develop a training programme for local tradespeople across the country so that more local workers would be able to carry on the necessary home improvements to the required standards for homeowners availing of schemes.
  4. The government should continue to fully support multi-annual grant budgets for the SEAI so that retrofitting schemes can operate unencumbered year-round.

Kevin Johnson, CEO of CUDA explained their position

“While we are hugely supportive of the Minister in relation to the massive undertaking of retrofitting 500 thousand homes and commend the important announcement in the budget today, we believe that certain simple changes are necessary if the target is to be achieved. We have been engaging with the Minister in relation to these issues as we truly believe that the expansion of the ProEnergy Homes scheme will boost local communities at their time of need and have tangible and meaningful socio-economic benefits. Recent reports suggest retrofitting homes to bring them to a B2 energy rating standard or above, could significantly reduce fuel poverty*. It could also see the creation of 1000s of construction sector jobs if run efficiently and taken up on a large scale.

As the trusted provider of financial services in communities throughout Ireland, credit unions are uniquely positioned to support the delivery of a one-stop-shop model for home energy retrofits. We understand that for many households the past few months have been incredibly difficult and will unfortunately remain difficult for some time. However, some households have been in a fortunate position to build up savings this year and this is borne out in record savings inflows to credit unions since March. At a time when the interest rates and dividends available on these savings will be at or near zero, investing in a home retrofit could make a lot of sense. Combining some savings with a low rate loan will make the monthly repayments very affordable and there are many benefits; lower heating bills, a more comfortable home and the opportunity to support local tradespeople.

The announcement of the [Training\apprenticeship Programme] is an incredibly important initiative so that local tradespeople can be upskilled to complete works to the higher standards expected when retrofitting a residential house to B2 rating. As community organisations, credit unions are anxious to support local tradespeople, but too few have been trained to the standards expected on deep retrofits. Upskilling existing tradespeople nationally would allow for the creation of panels across the country that will support local economies while ensuring competition keeps prices and exchequer funding to a minimum.”

Ends

*

Fuel Poverty is described as spending at least 10% of a household income on keeping a home warm

Oct 09 2020

CUDA Welcomes Reduction in Levies

By News

CUDA welcomes the announcement by the Minister for Finance of reductions in the 2021 levies for both the Credit Institution Resolution Levy [down c6%] and the Credit Union Stabilisation Levy [down c90%].  In particular, we appreciate Minister Donohoe’s decision to heed our concerns in relation to the Stabilisation Fund levy.

While CUDA continues to support the purpose of a Stabilisation Fund, as it currently stands it has yet to be claimed against as it is both difficult and costly to access.  CUDA did propose that the target size of the Fund should now be regarded as succeeded and therefore the levy be set at 0%, and we requested the Minister to carry out a review of the Scheme to see how it might be improved.

We look forward to its criteria and status being included in the upcoming Review of the Policy Framework for Credit Unions under the Programme for Government.

Jun 11 2019

CUDA meets with ICURN – International Credit Union Regulators’ Network

By Owner Members, Representation

The 2019 ICURN Peer Review of the Central Bank’s performance of its regulatory functions is currently underway. This review is assessing the legal, regulatory and prudential supervisory framework in place to fulfill the Central Bank’s responsibilities under Section 84 of the Credit Union Act, 1997 having regard to proportionality, nature, scale and complexity of credit unions operating in Ireland.

Read More
Jul 11 2018

Credit unions will use a proportion of €9bn in lending capacity to reduce SME lending costs

By News

“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.