Manchester, U.K. and Dublin, Ireland – The European Union's (EU) proposed Consumer Credit Union Directive threatens European credit union loan programs because of costly new provisions. The Association of British Credit Unions, Ltd. (ABCUL) and the Irish League of Credit Unions (ILCU) are both actively lobbying Brussels, the seat of the EU, to make legislators aware of the social tenant of credit unions. A vote taken in the EU parliament last month forced the new directive back to committee giving credit unions a temporary reprieve and more time to actively lobby. Many European Members of Parliament (MEPs) are not aware of the social nature of credit unions which, for now, exist only in two member countries – the United Kingdom and Ireland. There are credit unions in Poland and that country will join the EU next year. Polish credit unions would also fall under the provision when they join. According to Shaun Spiers, ABCUL CEO, "We have had meetings with the European Commission and relevant MEPs, and have worked closely with the UK Department of Trade and Industry, which has been very supportive of our position. We are also working with the Irish League of Credit Unions. All our member credit unions have been asked to write to their MEPs expressing concern about the impact the proposed directive will have.We will continue. The focus is now on the Legal Affairs Committee's rapporteur, Joachaim Wrmeling, who has been charged with redrafting the directive. We will be seeking a further meeting with his office before Christmas." Spiers also realizes that if the directive is passed, "winning an exemption will not be easy." But he believes "there is a strong possibility that it will fail." If credit unions lose, he says, "we will be working with sympathetic MEPs to table detailed amendments to the various clauses in the directive." All loans regardless of monetary value would be subject to the directives. Most credit union loans are for small amounts. ILCU provided Credit Union Times with detailed information on their objections: * They object to the article that requires financial institutions offer three separate interest rates. They feel this would require a major education process for each loan in particular and the movement in general. * The surety/guarantee agreements that would be required for each loan, regardless of amount, have the potential to double administration costs. * Refinancing and restructuring loans for members who have had economic reversals could involve further costs, although many credit unions already respond to members suffering hardships. * ILCU maintains that the directive that requires the credit union decide the best loan product for the member, limits the member's freedom of choice. * ILCU is also against the requirement that they would have to check credit ratings. At the moment Irish credit unions do not have access to credit bureaus, according to ILCU CEO Liam O'Dwyer. There are also legislative issues concerning member confidentiality in reporting data. The directives, according to ILCU lack a clear definition of over-indebtedness, which would limit CUs' ability to help members having trouble meeting their financial obligations. Credit unions under the new directive also would face increased insurance and liability costs. John O'Halloran, Head of Legal & Secretariat for ILCU wrote to the EU saying that, "The provision of credit to members for low monetary amounts may become uneconomic and may force credit unions to withdraw from this sector of the credit market. It should be possible to provide small loans in a more flexible manner than larger loans." Until there is revision of the proposed directives a 100 Euro loan would require the same paperwork as a 100,000 Euro loan. (1 Euro=$1.18) O'Halloran also stated that many credit unions are still volunteer run and the new regulations could " impact negatively on the operation of the whole movement in Ireland." He added, " If one considers the trend of rationalization amongst retail banks and the semi-state sector, resulting in the closure of many bank branches, post offices and ESB offices, the forced closure of credit unions would have a devastating effect on rural and marginalised communities." O'Hallaran cautioned, "If, due to economic reasons, credit unions are forced to withdraw from this sector of the market, individuals who require small advances of credit to fund their everyday living expenses may be forced to seek credit from unlicensed moneylenders. These consumers may then be subjected to penalizing interest rates and a vicious circle of debt without recourse to consumer protection." Many Irish banks will not loan amounts below 1,000 Euros. UK banks have similar restrictions. Staff from both ABCUL and ILCU have made and will continue to make trips to Brussels until the issue is settled. -

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