Credit Unions in Trouble

[Howitzer]

Originally Posted by Joe1234

It is a big credit union, probably with too many staff. A number of years ago, loans were given out to all and sundry, and there is a belief around Monaghan that a large majority of these loans were given to non nationals, who skipped the country. They have implemented new procedures now, but the damage has been done.

This sounds like nonsense. A case of "It be dem blacks dats ruined it fur de rest uf us", eh?

A search through any property related thread on AAM will throw up people giving and seaking advice along the lines of, if you want a loan that no one else will give you then go to a Cedit Union, oh and be sure to make sure they're not affiliated to the ICT, or whatever it is, so that the real banks don't find out about it.

The abuse of the lax lending procedures of many/most Credit Unions seems pretty endemic to me, and certainly isn't confined to dem der blacks.

[CCOVICH]

Originally Posted by Howitzer

A search through any property related thread on AAM will throw up people giving and seaking advice along the lines of, if you want a loan that no one else will give you then go to a Cedit Union, oh and be sure to make sure they're not affiliated to the ICT, or whatever it is, so that the real banks don't find out about it.

Yes, that certainly rings true with me as well.

And I think you are referring to the ICB-Irish Credit Bureau.

[2Pack]

Originally Posted by Joe1234

there is a belief around Monaghan that a large majority of these loans were given to non nationals, who skipped the country.

Which ignores the hard reality that the money was given out by Monaghan people who should have used their judgement better .

I'd say most of the bad debt is with locals who are still there. Better blame dem der non Moanaghaners all the same .

[ontour]

more politically correct way of putting it is the mobility of the workforce has compounded the problem of pursuing defaulters on loans.

Anecdotally I have worked with foreigners in Ireland who borrowed from banks and then decided to leave without paying off the loan. They knew that the level of their loans were too small for the banks to be bothered pursuing. Doubt that ICB makes any difference in these cases as I don't think that it would have international information or does it? And to dispell the obvious stereotypes, these were white south africans and kiwis !!

[CCOVICH]

Can we please eave the race issue out of what is a potentially interesting discussion.

Thanks.

[Joe1234]

Originally Posted by Howitzer

This sounds like nonsense. A case of "It be dem blacks dats ruined it fur de rest uf us", eh?

Please read my previous post again. When you do, you will read that I said I am only pointing out that "there is a belief......." At no point did I state it was a fact.

[Joe1234]

Originally Posted by 2Pack

Which ignores the hard reality that the money was given out by Monaghan people who should have used their judgement better .

I'd say most of the bad debt is with locals who are still there. Better blame dem der non Moanaghaners all the same .

That is indeed a harsh reality that my savings in the credit union were recklessly handed out by an incompentant management committee/board of directors. Which is why I am currently shopping around for the best rate on deposits and as soon as I find it I will be moving the bulk of my savings there.

2Pack, I assume (and hope) that your use of the term Moanaghaners was a typo error.

[2Pack]

Originally Posted by Joe1234

2Pack, I assume (and hope) that your use of the term Moanaghaners was a typo error.

twas me being funneh about those who blame our cousins for local problems in Monaghan.

10k (check the actual figure) of your money is guaranteed no matter what, I think the banks guarantee 25k or 30k . The rest would evaporate in the event of a collapse of an institution.

and this is a national problem related to volunteerism being in decline.

[RainyDay]

Originally Posted by ontour

Anecdotally I have worked with foreigners in Ireland who borrowed from banks and then decided to leave without paying off the loan.

I know of several Irish who took out 'car loans' and buggered off to Oz/NZ with the proceeds, with no intention of repaying the loan.

[Howitzer]

Defaulting on loans isn't something that's confined to any particular group.

For me the real issue is what could be a terminal decline of the Credit Unions. The Credit Union movement was always built on the notion of neighbours, friends and family in the local catchment area using their savings to give loans at very low rates to people who may not have been able to get any loan from the regulated financial instituions.

The reason why they were able to give these loans was trust. If you defaulted on your loan you were effectively robbing money from your friends and neighbours.

Ordinarily a Credit Union would only ever become insolvent in exceptional circumstances, local factory closing, somebody fiddling the books. You would hope that the Monaghan case has some such similar background. To accept that the principle of the Credit Union movement is no longer viable in Ireland due to a more transient population and a subsequent fall off in commuinity values would be a pretty sad thing, not to mention the financial implications, the fact that people who previously could only get loans from the Credit Unions would now have to resort to subprime lenders.

[2Pack]

Originally Posted by Howitzer

To accept that the principle of the Credit Union movement is no longer viable in Ireland due to a more transient population and a subsequent fall off in commuinity values would be a pretty sad thing, not to mention to financial implications, the fact that people who previously could only get loans from the Credit Unions would now have to resort to subprime lenders.

That is my worry in a nutshell Howitzer. The credit commitees do not know the borrowers (as much as they did) and the borrowers do not care about robbing their neighbours and friends (as as much as they did) and the whole system does not have the quality of volunteers to run and man the credit committee (as much as they did) so the proposition on which they are constructed breaks down , especially in Urban areas with large transient populations.

Monaghan may only be the first of many . Its sad really.

[lff12]

Originally Posted by Glenbhoy

I've never had any dealings with CU's - what advantage do they offer over banks? From my limited understanding, it seems to be that its a more personal service, wth the result that it's much easier to get loans, you then pay a slight premium for this. If the loans are insured, you would presume that the insurers are happy with the loan vetting procedures, but obviously there are problems, anyone fill me in on what the vetting procedures are?

The whole agenda of credit unions are towards providing a community services, whereas banks exist for the benefits of their shareholders, simply to make a profit. Therefore credit unions see themselves as duty-bound to consider the welfare of the applicant more than a bank would. They exploded in the 80s after tighter regulatory constraints on moneylenders made it not only less attractive, but created a vaccum where small loans were concerned.

What has been worrying is an increasing trend for credit unions to move away from traditional lending criteria - basically offering loans of multiples of the borrowers shareholding - which means that a union may be stretching the terms of what the borrower can afford. Also applicants - espcially somebody desperate for a loan to place as a house deposit - may be less than honest with the union, which places more risk with the union.

In the UK there is increasingly heavier pressure to setup a local credit union presence as as much as 20% of the population are now "unbanked" (i.e. have no bank account) creating a large level of financial exclusion. Its easy to talk about this from a shareholder persepctive, but it becomes more difficult and expensive for those without full banking facilities to exist if they don't have expected banking resources to use.

there is a very intersting discussion on credit unions and lending to those on low incomes in general, from a UK persepctive on http://www.jrf.org.uk/knowledge/find...olicy/0065.asp

[MandaC]

A newspaper report I read stated that there was a large fraud ring (East European) involved in the Monaghan Credit Union debacle. People were taking out loans and then vanishing from their rented addresses (across the border). Not being from the area, I dont know how true that is??

[Joe1234]

Originally Posted by MandaC

A newspaper report I read stated that there was a large fraud ring (East European) involved in the Monaghan Credit Union debacle. People were taking out loans and then vanishing from their rented addresses (across the border). Not being from the area, I dont know how true that is??

This is the RUMOUR that I have also heard, and my earlier post referred to it.

[Murt10]

Bang goes another theory. I thought Credit Unions were only for relatively small loans.

From the judgements section of todays Sunday Business post

"Patriarca, Reno
E238,425 of 109 Parnell St appt 116. Dublin. gentleman Plaintiiffs: Firhouse Credit Union Ltd Dublin (HC) Reg May 18 2006"

What in the name of heaven was a local credit union giving out such a large loan to any individual. I'm glad that I'm not a member of that particular Credit union.


Murt

[Slim]

I thought Credit Unions were only for relatively small loans.

Traditionally, this was the case. However, there was a significant liberalisation of the law through the Credit Union Act, 1997. CUs now assess the ability of each member to repay the loan. Loans have got larger but many are secured against property or guaranteed by a guarantor. However, many local CUs have not changed their Board membership significantly. This should mean they remain conservative but also that they are not able to calculate risk as well as other financial institutions. I, too, would be concerned at the size of the loan Firhouse issued but I might then be assuming that (a) the borrower was a non-national and (b) that it was an unsecured loan. We do not know the facts.

It seems that there are urban legends growing about non-nationals borrowing from CUs and skipping off. This has happened but it should not be blown out of proportion. CUs are bound to "write off" loans that are in arrears once they exceed certain timeframes without payment. This is an accounting exercise that seems not have been applied rigorously in the Monaghan case. Therefore they had to write a load off in one year, causing the crisis. Credit Unions are not in trouble. There is a huge fund in the SPS 9over €90m) to bail out CUs if needed.

However, CUs need their members to support them by borrowing responsibly.

Slim

[Marie]

As a founder member of a Dublin Credit Union (in the late 1960's) I am very sad to hear about the crisis for Credit Unions in the Republic. During my late teens (mid-60's) all concerned - Board, officers and cashiers - were volunteers who gave their time to get these very important associations going at a time when many Dubliners were indebted for life to unlicensed immoral 'door-to-door money-lenders' who charged extraordinary rates of interest........and when the only alternative was the pawn-shop. Yes, originally loans were proportionate to your shares as the primary idea of C.U. was to foster financial prudence as well as assist people of lower income who did not have bank accounts (they didn't have the money to put in them!) to educate their children, or finance medical treatment etc. The underlying 'trust' was represented by 'the common bond' and C.U.'s were only open to members of a specified labour-group (e.g. C.I.E. employees) or a particular geographical area which was closely specified.

They had unfortunately begun to lose their distinctiveness and identity under the pressure of the economic boom and the manic attitude to spending, debt and especially property-speculation. Their collapse is a great loss to society as a whole, especially young couples starting out, pensioners who could rely on loans to tide them over emergencies, and those who work in 'casual', or short-term contract, or less skilled jobs.

Originally Posted by Howitzer

Defaulting on loans isn't something that's confined to any particular group.

For me the real issue is what could be a terminal decline of the Credit Unions. The Credit Union movement was always built on the notion of neighbours, friends and family in the local catchment area using their savings to give loans at very low rates to people who may not have been able to get any loan from the regulated financial instituions.

The reason why they were able to give these loans was trust. If you defaulted on your loan you were effectively robbing money from your friends and neighbours.

Ordinarily a Credit Union would only ever become insolvent in exceptional circumstances, local factory closing, somebody fiddling the books. You would hope that the Monaghan case has some such similar background. To accept that the principle of the Credit Union movement is no longer viable in Ireland due to a more transient population and a subsequent fall off in commuinity values would be a pretty sad thing, not to mention the financial implications, the fact that people who previously could only get loans from the Credit Unions would now have to resort to subprime lenders.

[Howitzer]

Regulator to stress test Credit Unions

http://www.businessworld.ie/livenews.htm?a=2639390

[Carey]

This will be interesting to say the least. I bet some of the country ones are absolutely bricking it.

[TLC]

I believe that some Credit Unions lending practices did get out of hand over the last few years, I think this was due to the availability of "cheap" money from the main banks & the CU's thought that in order to compete they had to bend their rules & previous standards. It was unfortunate but quite understandable, they felt under pressure. The CU's in the past have been a godsend to people & personally I hope that they will be again.