COVID-19 – Payment Breaks in Credit Union’s Circular issued by the Central Bank of Ireland June 2020August 2020
The Central Bank of Ireland has been in contact with the boards of all credit unions throughout the pandemic at various times. The letter in June was regarding payment breaks offered to members who may be experiencing difficulties in paying their loans at this time.
In summary the CBI expects:
- Credit unions act in a way that protects the best interests of borrowers.
- Credit unions give appropriate support to borrowers who have been affected by COVID-19.
- Payment breaks should be a generally available option to affected borrowers, including those borrowers’ already in financial distress.
- Credit unions are operationally ready and prepared to engage with borrowers during, or at expiry of, the payment break in order to identify whether or not the borrower requires further support, and if so, to consider appropriate and sustainable solutions, as soon as possible.
- Credit unions are fully transparent and clear to borrowers as to what will happen after the term of the payment break, including setting out the available options to repay the loan and the full costs of the payment break.
- Credit unions have board approved plans to deliver an assessment of all borrowers on payment breaks to ensure that appropriate and sustainable solutions are identified in a timely manner for those borrowers who are not able to return to paying full capital and interest at the end of the payment break.
- The prioritisation of borrower engagement, assessment and determination of an appropriate and sustainable solution should be determined by the risk profile of the borrower.
- The level of distress in the credit unions’ loan books should be prudently considered and be reflected in provisioning levels.
- Sufficiently granular and timely reporting of the take-up of payment breaks across borrower type and sector should be readily available and used to inform key decision-making processes in credit unions.
For the full circular from the Registrar please click HERE
By Éilish Larkin - Regulatory Consultant