Debtors 'pay credit union before taxman'

Charlie Weston Personal Finance Editor, Irish Independent – 07 October 2013

CONSUMERS are making bigger efforts to repay overdue credit union loans than pay the taxman, it has emerged.

New figures show that when people are pursued through the courts over unpaid credit unions debts, they are more likely to have repaid some of the borrowings.

Credit unions registered 170 court judgments to get loans repaid in the July to September period, according to business information publication 'Stubbs Gazette'.

Half of the judgments were partially paid, according to James Treacy of Stubbs.

This contrasts with just one in 10 of 595 judgments taken by the Revenue Commissioners in the same period that were partially paid.

Banks registered 86 judgments in the third quarter of this year, but less than one in ten of these were what is called partially paid.

A judgment is a court order telling a person to repay a debt.

Banks claim that some mortgage holders in arrears are using their scarce funds to repay credit union loans instead of making repayments on the home loan. They have labelled this strategic default.

Loyalty

But credit union sources insist there is huge loyalty shown by members to the locally owned and operated lenders.

And householders are afraid they will shut off their last line of credit if they do not make a big effort to repay a credit union loan. The 'Stubbs' figures also show that the size of the loans being pursed by credit unions in the courts has gone up.

The average value of debts pursued by credit unions in the courts in the third quarter of 2013 was €22,000.

This compares with €14,800 for same period last year, a 50pc increase. There were 170 judgments registered in the courts with a total value of €3.8m, down from 276 judgments with a total value of €4m for the same quarter last year.

Charleville Credit Union in Cork had the most judgments, with 10. It also registered the largest judgment for €201,642.

St Canice's Credit Union in Kilkenny registered the second largest judgment for €171,000 against two individuals, holding them jointly and severally liable for the debt.

Mr Treacy warned the State's 400 credit unions will need to step up efforts to get defaulting borrowers on to repayment plans. This is because the new personal insolvency regime will mean struggling borrowers may be able to get debts owed to credit unions written off.