Debtors more likely to repay credit unions than banks

By Laura Noonan

Irish Independent

Monday March 05 2012

DEFAULTING borrowers are more likely to make good on court orders to repay credit union loans than to pay back cash to their banks, according to new research.

The research by Stubbs Gazette and the Irish Independent reveals that more than 40pc of debt 'judgments' registered by credit unions in 2011 resulted in at least partial payments by year-end.

That repayment rate is more than double the 18pc enjoyed by the next most successful lender, Bank of Ireland. Several lenders got no repayment at all despite going to court to obtain 'judgment' and then publishing the debt in 'Stubbs Gazette'.

The figures are based on an analysis of all registered judgments for 2011 and the 937 full and part-satisfactions published for those judgments.

The credit unions' success is partly explained by the fact that the loans they're chasing are typically lower than those being pursued by major banks, making it easier for people to repay.

The average value of the 817 registered judgments by the credit unions was €17,800.

But the credit unions also outperformed other lenders chasing small debts -- Permanent TSB's 50 registered judgments were for an average of just €12,000; by the end of the year it had received partial payment in just two cases.

Stubbs Gazette boss James Treacy said the figures showed credit unions were "better able to engender loyalty", adding that borrowers understood that defaults led to lower dividends for all members.

Credit unions also tend to apply for judgments sooner than banks, meaning that the borrower is "less far gone" by the time the debt has gotten to court.

"A credit union has a duty of care to all its members, whose savings fund the loans granted, to ensure that monies outstanding are paid back in full," a spokeswoman for the Irish League of Credit Unions said.

Judgment

The average amount paid off by credit union members last year was almost €14,100 -- pretty close to the average amount per registered judgment, which came in at €17,800.

For Bank of Scotland Ireland, the average repayment was less than €20,500 -- against an average registered judgment of €310,000. Bank of Ireland had average repayments of €11,100 against its average debt of just under €220,000.

The highest average repayment was €21,000 secured by Permanent TSB -- though the bank had just two cases of repayment from 50 judgments.

The lowest average repayment was €5,000 -- sharply lower than AIB's average judgment of €551,500. That €5,000 on average was paid back by 31 borrowers. AIB successfully registered judgments in 237 cases.

Banks that did not publish any repayments in respect of judgments included ACC (32 judgments totalling €116m), Irish Bank Resolution Corporation (Anglo; 20 judgments totalling €218.5m), National Irish Bank (46 judgments totalling €50.3m) and Friends First Finance (50 judgments totalling €1.8m).

- Laura Noonan

Irish Independent