Credit Union Loan : something showed up on ICB

Laura.Lee

I have been dealing with my local credit union for 12 years and have had many loans. I always repay and never miss a payment.
I owe €11,000 at the minute and applied for a top-up today of €2,000.

I have done this many times and my loan was €16,000 at its highest. I am in a permanent job earning €570 p/w.

I always get top ups approved over the counter but today they called me to say that it had to go to the Board of Directors on Thursday because it showed up that I had a litigation with my credit card company.

I owe €2,000 on a credit card. I canceled the card and have been repaying them €200 per month to clear it. This is interest free. I have no other loans/mortgage etc.

I was very taken aback when they told me that it had to go to the meeting on Thursday night. This hasn't happened in years. I am making all my credit card payments regularly.

Because this is the first time this has ever happened to me, I am wondering what my chances of getting the loan are? Do I have a hope?
I'm so confused and would appreciate any advice.

wmpdd3

A friend had to do this, same thing great job history etc but 3 weeks after getting a loan for her car €10,000, someone hit her and she needed €2000 to pay for the damage. Like you she had owed more but it was very close to the big loan she had just received.

She went to the meeting and they granted her the top up, she had to get a few more letters from payroll etc but she got the money in the end.

It could be that the CC is showing up as a distressed or re-financed loan...

Laura.Lee

wmpdd3 wrote: »

A friend had to do this, same thing great job history etc but 3 weeks after getting a loan for her car €10,000, someone hit her and she needed €2000 to pay for the damage. Like you she had owed more but it was very close to the big loan she had just received.

She went to the meeting and they granted her the top up, she had to get a few more letters from payroll etc but she got the money in the end.

It could be that the CC is showing up as a distressed or re-financed loan...

Thank you so much for your reply. I have never been refused before and have regularly topped up without any issues. I have convinced myself that I won't get it, but you have given me some hope!

mmc2010

Hi Laura, it might be worth getting an ICB report yourself to see what is showing up on it. It might be a mistake but if there is something appearring on your credit report, you should know about it. You can do this online on www.icb.ie and it can take up to 5 days to come out to you.

chris85

Laura.Lee wrote: »

I have been dealing with my local credit union for 12 years and have had many loans. I always repay and never miss a payment.
I owe €11,000 at the minute and applied for a top-up today of €2,000.

I have done this many times and my loan was €16,000 at its highest. I am in a permanent job earning €570 p/w.

I always get top ups approved over the counter but today they called me to say that it had to go to the Board of Directors on Thursday because it showed up that I had a litigation with my credit card company.

I owe €2,000 on a credit card. I canceled the card and have been repaying them €200 per month to clear it. This is interest free. I have no other loans/mortgage etc.

I was very taken aback when they told me that it had to go to the meeting on Thursday night. This hasn't happened in years. I am making all my credit card payments regularly.

Because this is the first time this has ever happened to me, I am wondering what my chances of getting the loan are? Do I have a hope?
I'm so confused and would appreciate any advice.

This is only an assumption but if the credit card was cancelled by you and on interest only sounds like you got into a spot of bother with it and the bank have noted this on the ICB.

Also most CU's go to the board for all loans these days for approval.

smcgiff

Even if you cancelled a credit card the debt remains and under normal circumstances continue to incur the same cc interest rate. The interest will only be stopped if payments have been missed. However this will affect your credit history, perhaps as long as five years.

Add to this that some credit unions are in trouble themselves then it's not surprising things have tightened up.

juan.kerr

Laura.Lee wrote: »

I owe €2,000 on a credit card. I canceled the card and have been repaying them €200 per month to clear it. This is interest free.

There must be more to this - CC companies don't just decide to forego interest. If you reached an settlement agreement it will be recorded as such.

badgerbroc11

The eu consumer credit directive now applies to Credit Unions as well as all other financial institutions. In order to 'protect' the consumer the cu must now document in much greater detail the borrowers current debt position and repayment ability. The knowledge of the member and past repayment history will not stand up in court under this new legislation.

The sad thing about this is Credit Unions were created to provide loans to financially excluded people whose only alternative are money lenders and would not have a documentable ability to repay. What options are left for these people?

The prime time programme last week showed cleary the scourge that is money lending and how credit unions continue to face bigger and bigger hurdles to lend.

What you need to do is write a letter to each of your local td's and tell them what is happening to the ordinary people out there. Unfortunately the Irish League of Credit Unions were asleep when the allowed this legislation go through unchallenged.

rugbyman

Good morning,
AFAIK, credit unions do not like "top up" loans. They have been OK for years but it has become clear that these loans become too big, or that the hard core of the new amount may never be paid back. I think their new way of looking at this matter is correct, though this may not apply to the OP at all.

regards,Rugbyman

Badger, if you have time, could you expand a little on how the new laws are bad for credit unions.

thanks

badgerbroc11

rugbyman wrote: »

Badger, if you have time, could you expand a little on how the new laws are bad for credit unions.

thanks

Rugbyman - Only got time today. Hope you have time, this is going to be a long one.

Whether the new laws are ‘bad’ for Credit Unions is a matter of opinion. They restrict Credit Unions in how they go about their business. They will also reduce this risk to Credit Unions which will make the regulator happy. So theoretically they are ‘good’ for Credit Unions.

My problem is that they are bad for Credit Union members as expanded below:

Section 35 Regulatory Requirements – Effective since November 2010
Link: http://www.centralbank.ie/regulation/industry-sectors/credit-unions/Documents/Section%2035%20Regulatory%20Requirements%20for%20Credit%20Unions%20-%20November%202010.pdf

Section 2 of this document deals with lending practices for rescheduled loans. Subsection 2.5 in bold is a serious issue. If a member who has lost their job, or who’s partner has lost their job calls into a Credit Union and gets their loan rescheduled, then a Credit Union cannot give this member any further credit. An example of this is a family with where one of the parents have had their hours cut, they are struggling with a mortgage. The bank have given them interest only and the Credit Union have rescheduled their loan also. Its late August and the two you children are getting ready to go back to school. New uniforms and school books are needed. They approach the Credit Union for a €500 loan. The Credit Union cannot breach the regulators guidelines and must turn down their application. Where does this distraught mother turn to? Yes, they money lender form Provident Personal Credit who is charging 157.3%APR instead of the Credit Union who only charges 10.47%apr.

The alternative to the above for Credit Unions is not to allow the member reschedule but accept that they will fall into arrears. When September arrives the Credit Union can advance further Credit, but the arrears that the member is encountering is being returned to the ICB. When these honest people get their lives back on track they will have a significant blemish on the Credit History. Is this fair? I don’t think so.

Section 3 of this document deals with provisioning requirements for rescheduled loans. Where a loan is rescheduled a minimum provision of 20% is required against that loan, no matter what the history of the member. This doesn’t really effect the day to day operations of the Credit Union, but when it comes to the year end AGM, the Bad Debts provision requirements are huge. This eats into the year end surplus and the ability for the Credit Union to distribute a dividend to its members. At the same time you have the regulator say that the cost base of the Credit Unions are too high. Well he is right – His provision requirements are causing it. So at least analyse the reasons for the bad debt provisions, don’t just state Credit Unions are in trouble because of High Bad Debt provisions. These massive provisions will never be used up which just means the accounts no longer reflect the true position of the Credit Union.

The European Communities (Consumer Credit Agreements) Regulations 2010
Link: http://www.irishstatutebook.ie/2010/en/si/0281.html
The full regime of Consumer Credit Directive has applied to Credit Unions since 11/12/2011. Section 11 of this statutory instrument deals with the obligations of the lender to assess the creditworthiness of consumers. Again on the face of it, this is prudent lending practices and would reduce the risk to Credit Union of Bad Debts. The reasons why Credit Unions were founded over 50 years ago were to provided loans the most vulnerable in society. This holds true today and to apply this part of the act in effect means that Credit Unions must be very careful in giving out loans to the unemployed, those on very loan incomes etc. In January 2012, 28% of the loan issued by the Credit Union I’m involved with were for amounts of less that €500. These were to long term members whose only other option would be money lenders. If we were strictly apply this ‘assessment’ of creditworthiness and ignore our local knowledge and past history of these members we would have to turn all these members away and into the arms of the moneylenders again.

The prime time programme broadcast on 24/01/2012 gave a good outline of problems people are facing. The link is: http://www.rte.ie/player/#!v=1132669. Also if you know anyone involved in your local SVP speak to them and ask them about their experiences.

Upcoming Personal Insolvency Legislation
Link: http://www.irishtimes.com/focus/2012/insolvency-bill/index.pdf
This is legislation that this country needs and should be welcomed. However for Credit Unions, this brings the EU Consumer Credit Directive back into sharp focus. Potentially the 28% of members of borrow small amounts of money, it would be extremely hard to prove that they have the ability to repay (notwithstanding that they have repaid loans for the past 20 years).There is a risk that an unscrupulous subsection of these (which will be a very small number) will try to take advantage of this legislation. We had a special meeting last night to discuss. In summary we feel that we are at a crossroads, if we go down the road of the strict interpretation of the Consumer Act, (as a result of the risk posed by the insolvency bill) then with immediate effect we must stop lending to, the unemployed, single parents, people on disability benefits, carers, as all these benefits are just to cover the cost of day to day living and also to people on low incomes. This will kill our ethos and turn us into banks, along with sending 1 in 4 of our borrowing members to money lenders. The other road we can go down is to protect our ethos and continue lending and supporting the less well of in society, who are also the reason why credit unions have been so successful. However, this legally speaking, would be putting our members’ savings at risk. Which do you think the board should choose?

All in all, I agree with the additional powers that the regulator has. It is great to see him going into a Credit Union which is in trouble and protecting the members. However this Credit Union was involved in speculative lending which is against the core ethos of the Credit Union movement.

What the originator of this thread has experienced is in many ways an inconvenience, he is fortunate to have a reasonable job and a good track record. Things should be sorted out for him and if they are not its probably because the board hasn’t come to terms with everything that is happening yet. However, think about the family who lost a job leading up to Christmas, had their electricity disconnected, applied for a small loan to get the electricity back, food for Christmas, and some small toys for their Children. Then think about this poor family walking away from the Credit Union having been refused a loan. Now think of this family in January as the money lender knocks on the door, takes the family’s social welfare book and meets them down at the post office every week and gets his interest before the family gets anything else. Someone needs to stand up and protect these people. The politicians are not.

rugbyman

Badgerbroc,
thank you for taking the time to explain those points. I agree with and have learned from most of what you say and disagree with a few wee bits and wonder what this means

"These massive provisions will never be used up"

Regards and thank you

Rugbyman

badgerbroc11

rugbyman wrote: »

Badgerbroc,
thank you for taking the time to explain those points. I agree with and have learned from most of what you say and disagree with a few wee bits and wonder what this means

"These massive provisions will never be used up"

Regards and thank you

Rugbyman

I did a random search for CU accounts on google and picked one.

(a) Bad debts provisions = 3.1m
(b) Average Loans written off last two years = 345K
(c) Bad Debts Provision cover = (a)/(b) 9 years

If bad debts continue as at present (which is the highest they have ever been) it will take 9 years to use up the provision. Majority of CU loans are for a period of less than 5 years. This and other Credit Unions have provisions against loans which they have not yet even issued.

The expenses of this Credit Union have been oversted by at least 1.5m, which means they no longer show a 'true and fair view'.

In a number of 2011 CU accounts, I have seen a 'smoothing' of surpluses where the Credit Unions have such large provisons they are using these to create a smoother set of results on an annual basis. This trend will become more eveident in the next 3 years where a majority of CU's will show a steady increase in surpluses year on year.

I have faith in Credit Unions, but no longer have faith in their accounts. These regulator driven provisions are misleading. What the regulator needs to do increase the reserve requirements creating a specific reserve for bad debts. Then manipulation of the P&L wouldn't be possible.