Information Booklet for Small and Medium-Sized Enterprises (SMEs) in Financial Difficulties

Introduction

 We at Blarney Credit Union Limited (BCU) are very aware that Members face challenges every day. If you are in or concerned about arrears or financial difficulties in respect of your credit facility agreement(s), we want to engage with you with a view to resolving those difficulties and helping you to meet your obligations. In this booklet, the credit facility agreement is referred to as the “Facility”.

While each borrower’s circumstances are different and will be treated accordingly, this booklet provides an outline of our general procedures.

The Central Bank (Supervision and Enforcement) Act 2013 (Section 48) (Lending to Small and Medium-Sized Enterprises) Regulations 2015 (the “SME Regulations”) aim to strengthen protections for SMEs while also facilitating access to credit, by introducing specific requirements that regulated entities must comply with.

The SME Regulations cover:

• Applications for credit
• Refusing or withdrawing credit
• Information to be provided after sale of
• Dealing with arrears or financial difficulties
• Certain notifications to guarantors, including: when the borrower first enters into financial difficulties; the balance remaining on debt (the residual debt) after the security on a Facility has been realised (sold); and in relation to the borrower being classified as “not co-operating”.
• Handling complaints and

We have included a useful Glossary of Terms used in this booklet, which you can find in

Appendix I. These terms may also be used in our communications with you.

Please note: Blarney Credit Union is regulated by the Central Bank of Ireland.

Resolution Process – FOUR Steps

Step 1: Communication

We need to talk...

It is in your interest to engage with us about your arrears or financial difficulties. We want to work with you with a view to finding a solution for your situation. By addressing it early, together, we may be able to avoid the position becoming worse. You can contact the Credit office.

Pre arrears or early arrears

 If you inform us that you are at risk of going into arrears or you are in arrears and inform us that you are worried about going into financial difficulties, we will offer you the option of a credit review to consider your situation. See the definitions of arrears and financial difficulties in the Glossary in Appendix I.

If you accept the offer, we will conduct a credit review. This means we will look at your credit facilities, loan security and any alternative arrangement that may be in place and consider your particular circumstances. We will identify what options are available to address your arrears or financial difficulties and whether our financial difficulties process can be applied to your case.

Financial difficulties

You may be classified as in financial difficulties if:

• Following a credit review, we determine that you are in financial difficulties, or
• You are in arrears for 2 consecutive months (i.e., greater than nine consecutive weeks in arrears) on your Facility or alternative arrangement.

Blarney Credit Union’s Commitment

• We will write to you within 20 working days of you entering financial difficulties to confirm that your case has been classified as such.
• We will provide you with information including: the status of your account; any details we may need from you; the impact of your financial difficulties on any other loan with the Lender; and details of a designated contact and how to contact
• In addition, we will offer you an immediate review of your credit facilities, loan security and any alternative arrangement that may be in place.
• We will give you sufficient time to complete any action that you have agreed to and will take steps to agree with you any follow-up communication that may be
• If you write to us in relation to your arrears or financial difficulties, we will respond to you within 10 working days of the date we receive your communication.
• We will ensure that our communications with you are proportionate, taking into account your particular circumstances. Our communications with you are confidential, and any meetings with you will be conducted in privacy.
• You may choose to engage a third-party adviser to accompany you during any discussions with us, whether these discussions are face-to-face or You may also choose to have a third party engage with us on your behalf. We will require written confirmation from you to authorise us to speak directly with any third party nominated by you.
• Blarney Credit Union will also communicate, as and when appropriate, with any guarantor on record and will ensure that they receive all required communications which are appropriate in line with the nature of their guarantee.

Step 2: Financial Information

We need to understand your finances.

To make sure we have a detailed understanding of your finances, we will need certain information from you in order to assess your case.

This may include: up-to-date financial and tax information; cashflow projections; up to date business plans; financial statements; bank statements; a sworn statement of affairs; and any other information we believe is relevant.

It is important to provide complete and accurate information. If you feel you need help with this:

• Speak to We can provide help over the phone. If you prefer to meet in person, we can arrange a meeting at our offices,
• To arrange a meeting, please contact a member of staff at our office.
• Seek independent advice. You may prefer to seek independent advice from your financial adviser or from MABS (the Money Advice and Budgeting Service). MABS is a national, free, confidential and independent advice service for people in debt difficulties or in danger of getting into debt MABS can be contacted on

0818 072000, Monday to Friday from 9am to 8pm. See also MABS contact details in Appendix II.

Step 3: Case Assessment

We will assess your case.

When we have all the information we need, we will assess your situation on its individual merits in order to work out the most appropriate solution for you. We will give careful consideration to:

• Your financial circumstances, including your overall personal and business
• Your current ability to make
• Your previous repayment history
• Your income from any rental property
• Agreements or facilities you may have with other
• Valuation of your assets
• Your financial
• Any additional information relevant to your current financial

As part of our assessment of your case, in certain circumstances we may ask a third party to carry out an independent review in order to evaluate the future viability of your business.

If we do this, we will write to you setting out the following information: an explanation of our reasons for conducting the review; information about what will be covered by the review; the name of the person carrying out the review; and information about any costs that may be borne by you. If there is a guarantor on your Facility, we will inform them if we require an independent review. We will also provide you with a copy of any report we receive following the independent review.

Step 4: Resolution

We look for a solution.

We aim to find an approach to deal with your financial difficulties. We try to make a decision within 15 working days of receiving all of the information we need from you. If we have been unable to finalise a decision within that time, we will tell you the reason and how long it will take to reach a decision. When we make a decision, we will write to you to tell you if we can offer you an alternative arrangement or not.

Alternative arrangement

An alternative arrangement is a negotiated variation or alternative to the terms and conditions of the Facility currently in place between you and the Credit Union.

We may be able to offer you an alternative arrangement with a view to addressing your arrears or financial difficulties, subject to you meeting our assessment criteria. If so, we will inform you of the details. If we are unable to offer you an alternative arrangement, or if you do not accept the arrangement offered to you, we will inform you of your option to appeal against our decision.

Alternative arrangement options may include one, or a combination, of the following:

• Restructuring the Facility
• A short-term extension, to allow you time to refinance the Facility (or Facilities)
• Consensual (agreed-upon) sale of all or part of your asset(s).

Enforcement 

If we are unable to agree an alternative arrangement or you break an agreed alternative arrangement and the arrears situation remains unresolved, we may proceed to enforcement.

This may include an application to the Courts for a registered judgement against the debt owed, and an application for a weekly or monthly Instalment Order, which you would be legally obliged to honor. It may also include the appointment of a receiver to manage and then sell a secured property, which has been secured against the loan, or we may initiate legal proceedings to repossess the secured property (or secured properties) and recover the debt.

It is important to be aware that you will remain liable for any remaining shortfall in the balance of your loan following the sale of an asset as a result of enforcement action. This amount will include any accrued interest, charges, legal, selling and other related costs in accordance with the terms of your Facility.

“Not co-operating” – what does it mean?

It is important that you engage with us in a timely manner and provide a full and truthful disclosure of information we request when assessing your situation. Otherwise, there is a risk that you may be classified as “not co-operating”.

The SME Regulations define “not co-operating” as a situation in which:

1. The borrower has failed to make a full and truthful disclosure to the regulated entity of the information required by it to assess the borrower’s financial situation, within the timeframe specified by the regulated entity.
2. The required warning letter has been issued to the borrower; and
3. The borrower has not carried out the action(s) within the timeframe specified in the

If we consider that you are not co-operating, before we classify you as such, we will issue a warning letter to you (and to any guarantor on the Facility) in accordance with Provision 20

(8) of the SME Regulations. The letter will outline the specific actions we require you to carry out to avoid you being classified as “not co-operating”. We can classify you as “not co- operating” if you do not carry out these specific actions within 20 working days.

If you are classified as “not co-operating”:

• An alternative arrangement may not be made available to
• The balance on the Facility could be demanded in full and any guarantees and security that have been provided may be enforced, including the disposal (sale) of any secured asset.
• Enforcement action may be taken, including the appointment of a receiver

to manage and subsequently sell any asset(s) that were provided as security in connection with your loan, or the initiation of legal proceedings.

• You will be pursued for any debt that remains outstanding after the security has been sold.

Your right to complain.

You have a right to make a complaint to Blarney Credit Union about the service we have provided to you or our provision of (or refusal to provide) an alternative arrangement.

You can make a complaint verbally or in writing to the Chief Executive Officer of Blarney Credit Union (see Useful Contacts in Appendix II).

If you make a verbal complaint to us, we may be able to immediately resolve it to your satisfaction. However, you may prefer to have the complaint handled in accordance with our complaints process for written complaints as outlined below.

If you make a written complaint to us, we will acknowledge your complaint in writing within 5 working days of receiving it and provide you with the name and details of a contact person in relation to your complaint. We will provide you with regular written updates on our investigation of your complaint. The updates will be provided at intervals of no more than 20 working days from the date on which your complaint was made.

We will try to resolve your complaint within 40 working days. If your complaint is not resolved within 40 working days, we will inform you of the timeframe in which we hope to resolve the complaint.

We will inform you in writing of the outcome of our investigation within 5 working days of completing it. If you are not satisfied with our response to your complaint, you have the right to make a complaint to the Financial Services and Pensions Ombudsman (see Useful Contacts in Appendix II)

Your right to appeal.

You have a right to appeal to the Credit Union if you are not satisfied with

• the withdrawal or reduction of your facility
• A special term or condition required in order to provide you with an alternative
• Our refusal to offer you an alternative
• Your refusal to accept an alternative arrangement offered to you having been classified as “not co-operating”.

You must submit your appeal in writing (see Useful Contacts in Appendix II) within 20 working days from the date that we notify you of a decision.

The Credit Union will acknowledge your appeal in writing within 5 working days of receiving it. It will consider your appeal and adjudicate (decide) on it as soon as is reasonably practicable and provide you with a response in writing within 5 working days of the completion of the appeal process. If it cannot reach a decision within 15 working days of receiving your appeal, you will be notified in advance of the reasons why and informed of the timeframe in which we hope a decision will be reached.

If the decision was to refuse, reduce or withdraw credit, you may have a right to refer the matter to the Credit Review Office. The Credit Review Office provides an independent, impartial credit appeals process for SMEs, including sole traders and farmers (see Useful Contacts in Appendix II)

Other important information

Impact of financial difficulties on your credit rating

We share information about the performance of your credit facilities account with

the Central Credit Register (CCR) or other credit reference agency or credit register, where permitted by contract or required by law. The Central Credit Register was established by the Central Bank of Ireland in accordance with the Credit Reporting Act 2013.

Your credit rating may be negatively affected if you miss scheduled payments or make payments late.

Fees and charges

 Fees or charges may be imposed in certain circumstances, in accordance with the terms and conditions of your credit facility agreement. The circumstances may include your account falling into arrears, or you are entering into financial difficulties.

WARNINGS

WARNING: If you do not meet the repayments on your credit facility agreement, your account will go into arrears. This may affect your credit rating, which may limit your ability to access credit in the future.

WARNING: YOUR HOME IS AT RISK IF YOU DO NOT KEEP UP PAYMENTS ON A MORTGAGE OR ANY OTHER LOAN SECURED ON IT.

WARNING: The entire amount that you have borrowed will still be outstanding at the end of the interest-only period.

WARNING: You may have to pay charges if you repay early, in full or in part, a fixed rate credit facility.

WARNING: The cost of your repayments may increase

Appendix I Glossary of Terms

Alternative arrangement means an agreement to discharge the borrower’s debt obligations which is entered into in order to address arrears or financial difficulties and which is a change to the terms and conditions of the loan agreement. This agreement may be in the form of a loan restructure or a settlement agreement.

Arrears arise where a borrower has not made a payment or part of a payment that is due in accordance with a credit facility agreement or alternative arrangement, by the scheduled due date for payment and, in the case of an overdraft facility, where the borrower’s overdraft limit is exceeded for 30 consecutive days. In arrears means a situation in which arrears have arisen.

Borrower, for the purposes of this booklet, means a micro-enterprise, small enterprise or medium-sized enterprise, including Farmers, in the State that has a credit facility agreement with Blarney Credit Union Limited.

Central Bank (Supervision and Enforcement) Act 2013 (Section 48) (Lending to Small and Medium-Sized Enterprises) Regulations 2015 (the “SME Regulations”) means the regulations that apply to specific activities for regulated entities in respect of SME credit facility agreements.

Communication means the exchange of information between a regulated entity and a borrower by speaking, by writing or by any other method.

Credit facility agreement (also called Facility) means an agreement in which a lender provides, or promises to provide, credit to a borrower.

Financial difficulty (and financial difficulties) means a situation in which one or more of the following applies to a credit facility agreement or to an alternative arrangement:

• The borrower is in arrears under the credit facility agreement or alternative arrangement for 2 consecutive months (i.e., Over nine consecutive weeks in Arrears)
• The credit facility agreement is an overdraft facility and the approved limit on the overdraft is exceeded for 90 consecutive days.

The regulated entity has determined that the borrower is in financial difficulties, after an assessment carried out in accordance with the SME Regulations.

Regulated entity means a regulated financial service provider carrying out relevant activities.

SME stands for small- and medium-sized enterprise and refers to a business that employs fewer than 250 people and has an annual turnover not exceeding €50 million or an annual balance sheet not exceeding €43 million.

You means the borrower(s) under any credit facility agreement with Blarney Credit Union Limited.

Appendix II Useful Contacts

Blarney Credit Union

Address: St Ann's Road, Blarney, Co Cork

Tel: 021 4381149

Email: info@blarneycu.ie

Web: www.blarneycu.ie