The Competition Authority has moved against the League of Credit Unions over a restriction requiring member unions to use its monopoly life assurance firm.

The development could open the credit union assurance market to competition. With 530 member unions and assets of about €6 billion, the business is lucrative.

It is the subject of a row between the league and certain member unions.

Some members claim the company that operates the league's life assurance monopoly, ECCU, charges fees that are 30 per cent above the market rate. The assurance is taken out in respect of account-holders' savings and loans.

The authority yesterday revoked a certificate that said a requirement on league members to source life assurance from ECCU did not offend the Competition Act. No such certificate has ever been revoked before.

The development could have serious implications for the league, which has been funded by ECCU's profits. While the funding system is being changed at present, the movement was the subject of a highly critical report in April by industrials relations expert Mr Phil Flynn, who questioned the league's administrative and funding structures.

The league's response is likely to be closely watched within the movement and in the life assurance business.

In the light of Mr Flynn's report, the league last month pledged to reform. It has, however, been riven by internal dissent.

Such dissent prompted a number of complaints to the Competition Authority earlier this year, with certain member unions claiming that ECCU's rates were more than 30 per cent higher than those quoted in the open market. Those complaints prompted the investigation that led to the revocation.

The league's likely response is unclear, although it claimed in submissions to the investigation that the unions who complained aimed to "cynically and inappropriately" involve the authority.

The revocation might mean the league will be obliged to remove a rule that says credit unions who fail to source assurance from ECCU will be disaffiliated. In addition, credit unions not in the league are unable to avail of the league's savings protection plan.

The league's spokesman said: "We've only just received the decision. We will need to study it and discuss it at our next board meeting."

The authority is believed to be waiting for the league's response before deciding whether further action is necessary.

A paper by an authority member, Dr Paul Gorecki, strongly implied that the restriction might not be legal. He said the authority was "no longer prepared" to certify that the restriction did offend against the Act.

In doing so, the authority cited complaints by credit unions in the Dublin suburb of Lucan and Bishopstown in Cork. Both are members of the Credit Union Development Association (CUDA), a lobby seeking reform within the league, which also made a complaint to the authority.

CUDA said its 21 members would expect to pay ECCU €5 million in 2002 but had been quoted fees of €3.5 million by alternative insurers prepared to offer the same cover. CUDA also claimed that two of its members received a special discount from ECCU after they placed their business with a rival. The league denied this claim.

The Lucan union, which has assets of €27 million, said the cost of cover with Hibernian Insurance was 38 per cent lower than with ECCU. The Bishopstown union, with assets of €63 million, said the cost of insurance with Hibernian was 5 per cent greater than ECCU in 1999, but 33 per cent less in 2000.

The league said these claims were "inaccurate, highly misleading and unsubstantiated".