LEGISLATION to allow credit unions extend the range of financial services they offer will be presented in the Dail after Christmas. This follows the approval yesterday by the Government of the Credit Union Bill 1996.
Under the terms of the Bill, to be published within days, credit unions will be able to offer foreign exchange services, cheque books, automated transfer machines and business loans as long as their plans are approved by the Registrar of Friendly Societies.
The maximum amount a member can hold in shares has been increased from £6,000 to £20,000. A cap of £20,000 has been put on the amount a member can borrow from a credit union this compares with a current maximum of 10 per cent of the credit union's total assets. Interest is set at a maximum rate of 1 per cent per month.
There will be a new cap, set at £20,000, on the amount a member can have in a deposit account. The new legislation will ensure that credit unions can provide strong competition to conventional institutions in the area of personal finance, according to the Minister for Commerce, Science and Technology, Mr Pat Rabbitte.
The powers of the Registrar of Friendly Societies who supervises the credit unions will be extended.
In addition to assessing the capacity of individual credit unions to offer new services, Mr Martin Sisk, the current Registrar, will be able to require the credit unions to comply with various operating ratios. He will be able to issue directions on advertising, prohibit activities he is not happy with, appoint directors and remove elected members from the board or the supervisory committee.
The Bill provides that credit unions can be put into administration or examinership and for the application of planned changes in companies legislation.
Not all of the 434 credit unions are expected to expand the services they offer. At different stages of development, they vary widely in terms of asset size.
About 10 to 15 of the largest credit unions, with assets of up to £10 million, are expected to move quickly to seek approval to offer new services. Smaller unions are expected to move very gradually towards additional services.
Employment is expected to double to about 5,000 over the next four to five years.
The movement has about 1.4 million members, total shareholders funds of £1.3 billion and total loans outstanding of £1.2 billion.
Announcing Government approval for the Bill, Mr Rabbitte said yesterday the purpose was to consolidate existing credit union legislation and to provide an updated framework for the development and supervision of the credit union movement.
The Bill would safeguard the community self-help principles on which the credit union movement was based and its social and mutual purposes, he said. All existing legislation covering the credit unions has been consolidated in the new Bill.
Mr Rabbitte stressed that the Bill was not aimed at encouraging credit unions to compete directly with the banks and building societies for commercial business. This would deflect funds away from meeting their social and mutual purpose and members primary needs for "small- to medium-scale, short- to medium-term personal loan finance", he said.
He had no concerns about credit unions taking on business lending, he said. "The credit union movement has a better record of prudent management of its affairs than some other institutions", he commented. Supervision would be more intrusive and more strict, he added.
Describing the £20,000 ceilings on share, deposits and on loans as "appropriate for credit union activity", he said the limits would ensure that credit unions continued to benefit from the special tax status they held - they are exempt from tax on profits. But he said he would listen to arguments about the levels set.
Individual credit unions will be able to offer members:
(1) cheque books;
(2) debit cards;
(3) access to automated teller machines;
(4) foreign exchange services;
(5) loans of up to £20,000;
(6) shareholdings of up to £20,000;
(7) deposit accounts to a maximum of £20,000.
