RESTRICTIONS ON credit union lending are hampering the movement’s ability to help people in financial difficulty, an Oireachtas committee heard yesterday.

The Credit Union Development Association (Cuda) told the Oireachtas Joint Committee on Economic Regulatory Affairs that legislation preventing credit unions lending more than 20 per cent of their loan books to customers over periods of more than five years meant they were often unable to help people wanting to refinance loans to avoid debt default.

Cuda representatives agreed with Labour Party TD Seán Sherlock’s suggestion that a proposed rise of the lending limit to 30 per cent was “not necessarily providing a panacea”. Mr Sherlock said further clarity was needed on the issue of credit union lending from the Department of Finance.

“The amount of lending should be based on the assets of the credit union, not the size of its loan book,” said Billy Doyle, member of Cuda’s management committee and the general manager of one of the largest credit unions in the State, in Dundalk.

This credit union has an asset base of €150 million in customer savings, but a loan book of just €80 million. “We have €70 million in surplus funds that would be available for lending,” Mr Doyle said.

Cuda, which represents 11 credit unions with 275,000 members, seeks an amendment to allow credit unions in a strong financial position to offer loans over longer periods. Refinancing existing debts over longer terms would allow heavily indebted customers who cannot get credit elsewhere – the core target customers of credit unions – to avoid a default.

Cuda chief executive Kevin Johnson told the committee it believed the future of credit union regulation lay within the structure of the Financial Regulator, but that credit unions would resist any Government attempt to regulate the movement in the same way as banks and building societies.

Regulations designed to address failures in the banking sector should not apply to credit unions, Mr Johnson said. He also rejected the idea that credit unions should be self-regulating.

“We would have fundamental objection to any savings protection scheme that is not regulated,” he said, referring to the Savings Protection Scheme operated by the rival representative body for the sector, the Irish League of Credit Unions (Ilcu).