Credit Control Committee report

Chair, Credit
Control Committee

Good governance in lending is dependent on high quality loan decision making, supported by appropriate policies, procedures, systems, controls and expertise. The main role of this committee is to manage the recovery of default debt but as well as that, we provide feedback and guidance to our lenders on what risks we see developing in the wider credit market and economy and on the individual cases we examine. 


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Working within the overall risk management framework that the Credit Union Board has established, this committee:
  • Reports the overall arrears and write off position to the Board of Directors monthly along with providing other key metrics connected to lending and credit control.
  • Provides feedback and advice to lenders
  • Reviews the risk criteria to ensure that it remains predictive of risk and makes appropriate recommendations for change to the board.
  • Applies the Board’s systems of ‘forbearance’ – how the credit union manages members who are having difficulty maintaining their payment obligations.
  • Advises Members on how best to manage their loan accounts, including liaising with Members who have been unsuccessful with loan applications.

The Credit Union has to absorb lending risk in order to remain profitable. There is no certainty of recovery in any individual lending case but we can develop lending processes and guidelines that ensure, as far as possible, that we make the right decisions more often than not. The challenge, once we have developed these processes, is to ensure that they do not create a situation where we end up refusing too many applications – balance is everything.

Unsecured lending is a core service and the main source of revenue for the Credit Union. The Credit Union is well capitalised and can withstand significant loan losses so it is right that we accept some risk in this area as that gives us the best chance to maximise approval levels, which is beneficial for everyone. Therefore, the Board has set its risk appetite for lending as Moderate, in comparison to most other risk areas where the risk appetite is rated lower. We use the amount of debt charged off is as a key measure to help us establish the levels of risk being absorbed and, in turn, to quantify what might constitute this ‘moderate’ risk absorption. We can assert that if this value is too low, then we are not lending enough. Or to put it another way, too many members are having their loan applications declined. Similarly, we can assert that if this value is too high, too many marginal cases have likely been approved.

46 loans were charged off over the course of the financial year, amounting to £105 019.97. This figure is within the aforementioned tolerance levels established by the Board and is a fair reflection of the Credit Union’s risk appetite and attitude to lending risk. The Credit Control Committee is satisfied that the lending processes in the Credit Union are therefore operating satisfactorily.

Whilst the Covid epidemic has inevitably affected some Members’ repayment ability, generally speaking, the governmental supports in the form of the furlough scheme have meant that most Members were able to keep up with repayments. Bad debts charged off closely correlate with national employment levels and as those remain buoyant, we do not anticipate a significant impact on charge off levels in the short term.

Bad debt charged off in previous years that was recovered during the current financial year amounted to £ 21,035.07.


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