First the Banks , now it's the Credit Unions.

Delancey

Today it was reported that up to 20% of Irish Credit Unions may not be viable due to bad debts , I was disturbed to see a representative of the CU movement on RTE News say that a '' bailout '' may be required but by way of ' re-assurance ' he said the amounts would be very small compared to the bank bailout - Gee thanks , thats comforting to know :eek:

With so much focus on banks the Credit Union situation has passed largely unnoticed by many people and I include myself in that , can anyone shed any light on what happened here ?
It has always been my understanding that union loans were for items like cars , furniture , computers , etc - unless a huge % of these loans have gone sour it's hard to see where the very serious threat is coming from.

This impending crisis is separate to the issue of bonds bought by Credit Unions collapsing in value.

How/where/why did it all go so wrong ?

Stheno

This has been flagged as early as 2009 as a potential issue with CUs tbh, I saw the article today and wasn't at all surprised.

Poor management, risky lending, the usual suspects, contributed to this.

Nothing surprising tbh.

dan_d

It has been an issue for the last couple of years. They seemed to just think that it'd be ok. The exact same problems as the banks - they loaned money, people now can't pay it back..plus apparently they bought bank bonds which are worthless now ie, they are some of the bondholders that we all want to burn so much. They were also giving out mortgages and loans to do property up you know - the attitude of many was if you couldn't get a bank loan, you could just go to your credit union and get one there.

I also gather that it's all that combined with Stheno's remarks above, and the fact that there's too many of them and they operate on a system that's not really applicable in today's world, ie it was set up years ago and worked well then, but not necessarily now.

Cookie_Monster

the CUs loaned money to people the banks wouldn't even touch and as such carry a lot more risk.
As far as I'm concerned that's always been a basic tenant of CUs, and was always going to come back to haunt them at some point, hence why I'd never ever touch one with a cent of my money.

flutered

when i had nothing they helped me, now they do not give me much in dividends but my few quid is in the credit union, i.m.o not every branch is in trouble, also i was luckey that i never invested in what was supposed to be gilt shares in the banks.

COYW

Not surprised by this at all and heard it being flagged a few years ago. They were and still are the default option for people who need to get finance. Lost count of the amount of people who has gotten loans from them for reason X, after being refused elsewhere and then spent in on Y (debt repayment such as credit cards being a common one).

thebman

Lots of small bad loans are just as big a problem when your a smaller entity.

Credit Unions can merge though which I thought was the favored solution to the problem as well as sharing resources to return them to profitability.

If they are now saying they need a bailout then they either they have done this already and it has failed or they have been sitting around hoping this inevitable problem wouldn't raise its head and now it has so they haven't prepared themselves for it and are now asking for a bailout which is a very different situation.

Delancey

Does anyone know for a fact that CU's got involved in mortgage lending ? I though such long-term lending was a no-no ?
While it could be argued that they traditionally have lent to those refused elsewhere it is a practice that served them well over the years - obviously something changed / went wrong to leave them talking about a '' bail out ''.

thebman

Delancey wrote: »

Does anyone know for a fact that CU's got involved in mortgage lending ? I though such long-term lending was a no-no ?
While it could be argued that they traditionally have lent to those refused elsewhere it is a practice that served them well over the years - obviously something changed / went wrong to leave them talking about a '' bail out ''.

Last I heard, only a small number of CU's got involved in mortgage lending.

The vast majority didn't. Wouldn't be surprised to learn those that did only did so to a small number of select people in the area with large amounts in the union if you know what I mean

I don't think my Credit Union did and it is a fairly big one with ATM machine and all that, about that size of a bank but don't think they ever did mortgages.

I've never actually seen one offering mortgages, just rumors they did.

Good loser

Joe Higgins is always promising us that if the banks were brought under 'democratic control' the problems we've had with them wouldn't have arisen.
How come then we have all these problems with the Credit Unions?

PennyLane88

COYW wrote: »

Not surprised by this at all and heard it being flagged a few years ago. They were and still are the default option for people who need to get finance. Lost count of the amount of people who has gotten loans from them for reason X, after being refused elsewhere and then spent in on Y (debt repayment such as credit cards being a common one).

Maybe, im in the process of getting a loan. Full time job, well paid and i still have to jump through hoops for the car loan. If they dont approve me, i'm withdrawing all my savings. Found them very difficult to deal with, everytime i went in, they needed more paperwork.

But yeah, from talking to other people, they seem to be the place to go for a loan.

FlashD

PennyLane88 wrote: »

Found them very difficult to deal with, everytime i went in, they needed more paperwork.
.

I'd take that as a positive. At least they are being thorough.

It shouldn't be easy to get a loan. It's not a divine right not matter what your circumstances.

It's the banks giving out enormous sums of money left, right and centre to every Tom, Dick and Harry that's landed this country in a mess.

Regards.

moorefield

Credit unions are in trouble no matter how the story is spun

Interesting provocative blogger Mountstreet has been posting on credit union issues for quite some time.

Sleepy

There's a sociological element to the CUs' problems too. A large part of their customer base would be the exact same people who've just lost their jobs in construction / trades / retail...

moorefield

@ sleepy which is why loan arrears have jumped to 17.5% this year up from 14.5% last year and the full loss cycle isn't over yet. Thing is credit unions will not be able to trade out of their problems without substantial state aid which will only be made available if they modernise and consolidate. The challenge for credit union leaders is to not waste a good crisis and get down to the business of running modern credit unions. Problem is there aren't any leaders emerging and too few good credit unions around which to consolidate.
The social dimension will have to include for substantial debt forgiveness which is something credit unions have not wise'd up to yet. Many are rescheduling bad loans - trying to kick the can down the road and chasing people through the courts looking for judgements and instalment orders.