The approximately $71.5 million written off by Venture Credit Union may be alarming, but it is not uncommon and potentially could be managed by the credit union due to its large size and cash flow.
However, both Venture and other industry experts acknowledged the loan market had been affected and would have to be monitored.
The company’s non-performing loans according to the VCU annual report was listed at $55 million while also disturbingly, the loans in arrears for more than 90 days equalled $88 million.
This represents 13 per cent of total loans handed out by VCU.
Even more worrisome, about $32 million of those loans listed in arrears fell between the 30-59 day range, signalling there had been a struggle for even recently taken loans to be repaid.
VCU’s delinquency committee noted in their report that despite the Government’s economic relief measures for industries and individuals significantly affected, “it was not enough to insulate Venture from the wave of loan defaults, as our members battled their individual circumstances as a result of the pandemic.”
The committee said, “neither our budget nor our credit management systems catered for COVID-19, and quick action was required to adjust to our new reality.”
These actions included the board agreement to increase the loan waiver entitlement from one month to three months for the year 2020, to all qualifying members in need of assistance.
All the while the credit union would examine every month its provisioning for expected credit losses and increase it accordingly.
This situation made some raise eyebrows even more at their large write-off, although there was an admittance that Venture Credit Union still remained a large and liquid institution at this time.
An industry insider told the Business Guardian that while they had never seen a write-off figure that large, it was a regular practice for credit unions to write off bad loan debts, however, its ability to absorb such liabilities depended upon its structure.
In Venture’s Annual Report, it was confirmed that had decided to write off 315 accounts in the sum $71,487,261.61 during the 2021 financial year. See Table
The report stated that the credit union had made every effort to recover bad debts or delinquent loans in pursuance of the recoveries procedure of the society however their efforts were “proven futile.”
More importantly, for stakeholders the report also noted that Venture “has previously made loan loss provisions which fully cover the amount of $71,487,261.61.”
However, with a country that has seen the crashes of Clico and the Hindu Credit Union in the mid-2000s, the sizeable figure once again raised questions about regulatory bodies in place for credit unions and cooperatives to protect investors and other stakeholders.
The Business Guardian contacted officials at the Central Bank to ask if the reported write off was of any concern to them. However one official there informed us that the Central Bank was not responsible for the regulation of the credit unions.
That responsibility rather fell to the Commissioner for Co-operative Development.
The Business Guardian attempted to contact current acting Commissioner Charmaine McMillan-Simon for comment on the matter but was unable to get a response.
Joseph Remy, president of the Co-operative Credit Union League of T&T, said while he had seen the reports concerning the planned write off by Venture Credit Union and formed some thoughts on the matter he wished to get more details about the write off before commenting on it publicly.
However, Colin Bartholomew, senior lecturer with Cipriani College of Labour and Cooperative Studies, with insight into the operations of credit unions due to his previous attachment as a co-operative development specialist in the Ministry of Labour, felt Venture had to his knowledge approached the situation properly.
He said while the large figure would raise some eyebrows, it was likely that the decision to write off the debt would have only been agreed upon after consulting with the membership.
The membership, the lecturer said, would then vote on the matter before any such decision would be made.
He said, however, to ensure that the credit union would not incur bad investment which could potentially cripple the organisation, the membership would have to be vigilant so as to not allow poor decisions concerning mounting debt to be made.
Its annual report explained the outstanding accounts which were written off belonged to the following categories:
Abscond: Tracing agents have been unable to find the debtor.
Deceased: The account’s owner has passed away.
Uncollectible: Debtor is imprisoned indefinitely, no documentation is available to pursue, and any other qualifying reason for which a debt may be deemed to be uncollectible.
Uneconomical to Pursue: Balance is too small for further action.
Unenforceable: Debtor is overseas or the statute of limitation has expired ( four years has passed since the last payment was received on the loan).
It was also noted that large write-offs or large loans, often deemed as investments by credit unions, in general, would also be brought to the attention of the Commissioner of Co-operatives and be subject to the approval of the Commissioner.
In that breakdown, it was revealed that a vast sum of $60,240,828.31 attributed to 268 accounts, was deemed to be uncollectible.
The other categories combined for $11,246,433.30.
Earlier in the week, president of VCU Hayden Ferreira told the Business Guardian that he did not wish to go into detail concerning the loans of members.
However, it was later publicly reported that $23 million owed to the Credit Union by former T&T Football Association president David John Williams, had been among the $71.5 million that been earmarked to be written off by the credit union.
The issue of the former TTFA head’s debt to the credit union first emerged in 2019, when the credit union put out a notice in the newspaper seeking out John Williams about the outstanding loan.
The W Connection founder blamed the publication for this, which he called private information, as a turning point in his unsuccessful attempt to retain the presidency of the TTFA in 2019.
John-Williams’ debt, based on the breakdown offered by Venture’s Annual Report, accounts for just about a third of the figure set to be written off.
When the Business Guardian contacted John-Williams, he informed us that he was already on a call with one of Guardian Media’s Sports Editors.
We attempted to have our questions asked through the Sport Editor but Williams ended the conversation before our questions could be asked.
The Business Guardian called John-Williams twice thereafter, and this call was sent to his voicemail.
Questions were then sent to Williams via SMS text message and WhatsApp respectively but no reply was sent.
Venture Credit Union also saw a significant increase in the number of loans not approved in 2020 compared to 2019. Of the 888 loans sought through the credit union last year, 393 loans were denied last year. These denied loans total $55.6 million compared to $19.1 million in denied loans the year prior.
Despite this about $12 million more was paid out in approved loans with $133 million in approved loans compared to $121.9 million in 2019.
Most loans paid out by VCU were sought to purchase cars, with 239 such applications followed by 189 loans for repairs and 154 for Debt Consolidation. Unsurprisingly, only three people sought loans for travel, given the closure of borders.
The credit union also reaffirmed that despite writing off the debt, they would still seek to recoup what they can from the errant accounts.
The financial report stated, “Although these bad debt accounts will be removed from the active loan portfolio, there will be continued follow-up action of some accounts through our external debt collectors.”
