MONTHS after Hurricane Melissa, Jamaica’s financial system has held up better than feared, but some credit union borrowers are still struggling to keep up with their loans.

First Heritage Co-operative Credit Union (FHC) has introduced its first special loan amnesty for members whose payments have been outstanding for at least eight months. It could allow them to settle for less than they owe, move to a revised payment plan, or have interest and late fees reduced or waived.

“This is our first time rolling out an amnesty programme of this nature. We are aware that our members occasionally face financial challenges and as such we are always exploring ways in which we can support them,” FHC told the Jamaica Observer.

“It is our view that the special loan amnesty sends a clear signal to our members that we are desirous of helping them take deliberate steps around clearing their balances and restoring their credit,” it added.

FHC said Hurricane Melissa did not prompt the programme. It reported a “nominal increase” in past-due loans after the storm, but said its delinquency rate has generally trended down over the past few years. The credit union declined to say how many of its loans are at least eight months in arrears or what those loans are worth.

Across the credit union sector, more loans have fallen behind. The Jamaica Co-operative Credit Union League (JCCUL) said 6 per cent of loans were in arrears at June, up from 5.22 per cent a year earlier. It pointed to changes in members’ employment and income, along with other pressures on household cash flow.

JCCUL also reported that non-performing loans increased by 33 per cent over the year. That was slower than the 39 per cent increase in the previous comparable period. The league did not provide the dollar value of those loans.

Meanwhile, borrowing by individuals has continued to grow. Bank of Jamaica (BOJ) reported that credit to individuals grew by 7.9 per cent in the June quarter, compared with 6.9 per cent a year earlier. The BOJ figure is a separate measure of lending and does not establish why people are borrowing or how many credit union members are taking on new debt.

JCCUL said it had expected Melissa to cause more severe damage to credit union loan portfolios than has materialised so far. The BOJ also said in July that the wider financial system remained stable, although the economy had contracted by 4.1 per cent in the March quarter because of the hurricane. It warned that a prolonged recovery could affect borrowers’ ability to repay.

FHC’s amnesty runs until December 31. There is no standard discount for eligible members. The credit union said any settlement would depend on the borrower’s circumstances and terms acceptable to both sides. It would consider all types of loans.

“Favourable settlement options means payment arrangements or terms that are acceptable to both the member and the credit union,” FHC told the Business Observer. It listed a reduced settlement amount, a revised payment plan, a waiver or reduction of interest and late fees, and a lump-sum settlement among the possibilities.

FHC said it wants to help members clear overdue balances and improve their credit standing. Successful settlements would also improve its own delinquency rate and loan portfolio.

The league said amnesties are unusual among credit unions, though individual institutions may use them periodically to recover long-outstanding debts. It said assistance must be assessed case by case, with credit unions also considering the protection of members’ savings.

For FHC members who settle, future borrowing remains possible but is not guaranteed. The credit union said it would consider a new loan once the member meets its lending criteria, taking into account the circumstances that caused the account to fall behind.