Credit unions three times more likely to recover debt

Dearbhail McDonald Legal Editor
Irish Independent (2nd January 2013)

CREDIT unions are now the most successful lenders at forcing customers to repay their loans, new research shows.

The findings show that credit unions are much more aggressive than their banking counterparts at pursuing their members for money – and are more successful at getting the money back.

While the sums owed to credit unions are less than those owed to banks, they are three times more likely to have the money repaid.

The results of the detailed study show that as part of a new approach of pursuing their members in the last 12 months, credit unions have secured 816 court judgments valued at more than €14.2m, with the average debt standing at €17,502.

The study – by debt collection agency Businesspro for the publishers of 'Stubbs Gazette' – shows that credit unions have recovered partial payments in 367, or 45pc, of cases.

This compares to an overall partial repayment rate of just 15pc for other lenders and creditors who together secured court ordered debts of more than €1.3bn in 2012.

The 45pc partial payment rate for credit unions compares to 18pc for the Revenue and 0pc recovery rates for NAMA and the former Anglo Irish Bank, now known as the IBRC.

Rehabilitating

"The credit union ethos of rehabilitating debtors seems to be standing credit unions in good stead," said James Treacy, managing director of Businesspro, which publishes 'Stubbs Gazette'.

"The aggressive stance of the Revenue Commissions has also paid dividends in the number of judgments that have been partially paid."

Businesspro said that the figures show that the size of judgment is the clearest indicator as to whether it will be repaid, or partially repaid. Larger judgments are "appreciably harder" to collect.

"Though NAMA has yet to secure a partial payment on any of their 26 judgments, the sheer scale of the judgments and the illiquidity of the debtors' assets will inevitably mean long lead times between obtaining judgment and securing partial payments. There will be a similar situation with IBRC judgments," said Mr Treacy.

Revenue secured court-ordered judgments valued at €94.3m this year, with the average tax debt standing at just over €50,000.

Permanent TSB, with average debts of €166,218, tops the partial repayment league of banks with a recovery rate of 17pc.

Bank of Ireland secured 179 court judgments valued at €33.1m and is receiving partial payments from 25 debtors, a recovery rate of 14pc.

The figures have been released ahead of reforms to Ireland's debt regime in the Personal Insolvency Bill, which will allow people with substantial debts to have them wiped off, subject to certain conditions.

- Dearbhail McDonald Legal Editor

Irish Independent