# Will a Credit Union allow shares to be offset against loans?



## Brendan Burgess (13 Jul 2009)

A friend of mine is reorganising his finances.  He has cut up his credit cards. He is trying to realise investments. He is trying to get the mortgage to interest only. 

He has a €40k loan from the Credit Union with an interest rate of 8%. He also has shares of €10k with little or no dividend. He has asked the CU to set the shares against the loan and so reduce his annual interest bill by €800, but the CU is refusing. 

Is there any way of persuading them to facilitate this? Are they prevented from doing this by the Credit Union Act?


----------



## ml10 (13 Jul 2009)

I had this same problem with my credit union, I explained to them that I couldn't afford the payments due to job loss but they weren't budging on what I had to pay back, so I asked them to take my shares and they kept saying no.  Eventually I stopped paying them until they sat up and paid attention and then they agreed to take my shares against the loan.  So maybe he should do that.


----------



## Brendan Burgess (13 Jul 2009)

Thanks anyway, Anyone

Or in plain English, you must not reduce your shareholding to less than 25% of the loan outstanding.

So if you have a loan of €100 and shares of €30, you can withdraw €5 maximum. 

This would not apply to a savings account, as distinct from a share account. I must confirm if it's a share or savings account.

Is there any way around this? 

This legislation should be changed.

brendan


----------



## Speedwell (13 Jul 2009)

Brendan, my credit union have often allowed me to transfer shares to offset a loan during the term of the loan. Not all the shares mind but some of them. Maybe he should try them again.


----------



## Crugers (15 Jul 2009)

> ...Or in plain English, you must not reduce your shareholding to less than 25% of the loan outstanding...


The limit of 25% is set in the Credit Union Act and is only available with the explicit approval of the Board of Directors


> ...So if you have a loan of €100 and shares of €30, you can withdraw €5 maximum...


Only with the explicit approval of the Board of Directors 



> ...This would not apply to a savings account, as distinct from a share account. I must confirm if it's a share or savings account...


Section 32(3) of the CU Act seems not to differentiate between shares, savings or deposits...
_S32...._
_(3) If a member of a credit union seeks to withdraw *a share in or deposit with the credit union* at a time when he has an outstanding liability (including a contingent liability) to the credit union, whether as borrower, guarantor or otherwise, that withdrawal shall not be permitted unless—_
_( a ) were the withdrawal to be permitted, the value of the member's savings immediately after the withdrawal would be not less than the amount of his outstanding liability; or_
_( b ) the withdrawal is approved, in accordance with the registered rules, by a majority of the members of the board of directors voting at a meeting of the board;_
_but no approval may be given under paragraph (b) if, were the withdrawal to be approved, the value of the member's savings immediately after the withdrawal would be less than 25 per cent. of his outstanding liability._



> ...Is there any way around this?...


Not without 'flouting' the law!


> ...This legislation should be changed...


One of many reasons!


----------



## Brendan Burgess (15 Jul 2009)

Thanks Crugers

Just to be clear - No credit union can refund money if it brings the deposit below 25% of the loan outstanding.  However, if you try to withdraw shares in excess of 25%, the teller will refuse and refer you to the board? 

Are such withdrawals referred to the board in practice? 

What is their attitude to such withdrawals. Are they generally approved or generally refused?


----------



## demoivre (15 Jul 2009)

Brendan said:


> He has a €40k loan from the Credit Union with an interest rate of 8%. He also has shares of €10k with little or no dividend. He has asked the CU to set the shares against the loan and so reduce his annual interest bill by €800, but the CU is refusing.



Is it possible for him to borrow €30k elsewhere and repay the CU using the new loan and existing shares?


----------



## demoivre (15 Jul 2009)

ml10 said:


> I had this same problem with my credit union, I explained to them that I couldn't afford the payments due to job loss but they weren't budging on what I had to pay back, so I asked them to take my shares and they kept saying no.  Eventually I stopped paying them until they sat up and paid attention and then they agreed to take my shares against the loan.  So maybe he should do that.



If your CU is a member of the ICB that strategy might adversely affect your credit rating.


----------



## Crugers (15 Jul 2009)

> Just to be clear -
> No credit union can refund money if it brings the deposit below 25% of the loan outstanding.


 *Correct, it is against the law (CU Act).*



> However, if you try to withdraw shares in excess of 25%, the teller will refuse and refer you to the board?


 *Em! Policy and practice in individual CU's would vary. Since such a withdrawal would be a breach of the CU Act it would(should/must) be refused by all (by teller, by manager, by Board).*



> Are such withdrawals referred to the board in practice?


 *See above.*



> What is their attitude to such withdrawals. Are they generally approved or generally refused?


 *See above.*


----------

