Ulster Bank fee is against the ‘spirit’ of loan scheme
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ICMSA president John Comer said it was not in keeping with the spirit of the loan scheme and would strike farmers as another example of “unfair” charging.
“That interest is more than sufficient in terms of margin for the bank and we note too that neither of the other banks involved in the initiative have felt the need to make this additional gratuitous charge,” he said, adding the ICMSA will bring up the matter when it meets Ulster Bank tomorrow.
The ICSA’s rural development chairman Seamus Sherlock criticised Ulster Bank as “profiteering” from the support scheme.
The scheme announced in the Government’s 2016 Budget was developed to support farmers experiencing short-term financial pressure due to price volatility. For the scheme, the Government leveraged €11m of EU aid backed up by exchequer funds of €14m to provide an interest subsidy fund of €25m. Farmers could apply for an unsecured loan up to a maximum of €150,000 over six years at a rate of 2.95pc, with optional interest-only repayment periods. “The spirit of this was that the 2.95pc interest rate, coupled with the interest subsidy, means that banks should have adequate margin without resorting to additional creaming off of money from farmers,” said Mr Sherlock.
He welcomed the decision by Bank of Ireland and AIB not to charge any handling fee. “If all banks had taken this approach, it would have amounted to some €1.5m taken as extra profit out of farmers’ pockets.” He said the tight timeframe and huge demand meant farmers had no potential to shop around and were a “sitting duck” for this charge.
Average
Ulster Bank stated the average loan size under the scheme was €50,000, with 500 customers expected to draw down loans.
John Fitzgerald, head of Bank of Ireland Agribusiness, confirmed they charged no handling fee, with 60pc of the €65m drawn down. “The scheme was designed to replenish working capital on farms — farmers had used cash flow and when prices dropped, they felt the squeeze,” he said.
AIB confirmed no handling fee was charged.