DERRY, Ireland–More than 1,000 members of Derry Credit Union here have been told they must withdraw their money because they exceed a deposit cap put in place due to sluggish loan volumes.
At present, deposits are capped at £20,000, but by the end of April that amount is being reduced to £15,000. The change affects 1,052 members of Derry CU. Two other CUs in the market, Pennyburn Credit Union and Waterside, CU, also have caps set at £20,000.
Ireland’s credit unions are required to have capital of at least 10%.
“Derry Credit Union must generate income to pay for the services provided, including members’ dividend and interest rebate,” states a letter sent to members. “Our main source of income is the interest we charge on members’ loans. Since 2010, our loans have decreased from £41.6m to £30.6m and our shares have grown from £70.6m to £83.2m. We welcome this display of confidence by our members in our financial strength. However, due to the very changed regulatory environment in which Derry Credit Union and credit unions around the country are now operating, there are downsides to such an increase.”
The credit union’s reserves are taken from the credit union’s yearly surplus. Members’ dividend is also paid out from the yearly surplus.
“The challenge facing us is that if shares continue to rise at their current levels, the funds available to pay dividends (if a dividend can be paid at all) at year end may be significantly reduced,” the letter states.
The credit union, which has a total membership of 30,304, said in the letter the £15,000 cap was a “temporary measure.” Any members over the £15,000 cap after April 30 will be sent a check for the surplus amount.