Question: I am a member of my local Credit Union and I currently have a loan of less than €10,000 with it. I adhere strictly to the repayment schedule. However, as my children are now returning to school after the school holidays, I am under increasing financial pressure and I wish to withdraw my shares currently in the Credit Union totalling €6,000. My Credit Union is not willing to allow access to those shares as it states that they are held as security for my loan. If I cannot get access to my shares, I will have to borrow further monies from another Credit Union. You might clarify for me the position regarding the shares and the possibility of borrowing from another Credit Union in my county.

Answer: No doubt your question is relevant to a lot of readers in this current economic climate whereby they will be relying of their savings to deal with events such as returning to school. While Credit Unions traditionally have been regarded as financial institutions whereby small loans are drawn down by members, it is important to understand that the Credit Unions are registered under the Credit Union Act of 1997 as amended by the Credit Union and Co-Operation with Overseas Regulators Act 2012 and governed by Standard Rules. These Rules are constantly under review and will be amended where necessary.

To deal with your immediate question, Rule 38 of the Standard Rules governs the withdrawal of shares. It clearly states that if a member of the Credit Union seeks to withdraw shares at a time where there is an outstanding liability, the withdrawal shall not be permitted. There are two exceptions to this and a withdrawal will be permitted if the value of the member’s savings immediately after the withdrawal would be not less than the amount of the outstanding liability or the withdrawal is approved by a majority of the members of the Board of Directors voting at a meeting of the Board. However in relation to the latter situation, no approval will be given if the value of the member’s savings immediately after the withdrawal would be less than 25% of the outstanding liability.

No doubt when you entered into the loan agreement with your local Credit Union, you received a copy as required under law of the Credit Agreement. It is clearly stated in the standard Credit Agreements that shares are pledged as security for repayment of a loan together with interest, costs and expenses. This no doubt is a provision which was drawn to your attention at the time of the signing of the Credit Agreement.

You have also raised the question of approaching another Credit Union in your county with respect to a new loan to cover your expenses. However, prior to applying for a loan, at another Credit Union, it will be necessary to make an application for membership. Membership is not automatic and will depend on the rules commonly known as the common bond under which a particular Credit Union will operate. For example some Credit Unions will only accept individuals residing or employed in that locality. There are of course industrial Credit Unions and the common bond there is based around being employed by a particular employer or having retired from employment with a particular employer.

By way of conclusion, a better approach would be to revert to your current Credit Union and endeavour to have some shares released with the consent of the Board of Directors.