The Irish League of Credit Unions (ILCU) has again shelved plans to disaffiliate 12 rebel unions. Dominic Coyle and Mary Carolan report.

The board of ILCU had been due to decide at a board meeting today on the expulsion of 12 credit unions over their refusal to take out loan protection insurance from ILCU's in-house insurance provider.

However, the board found itself facing a High Court injunction yesterday on foot of a move by the Competition Authority to block any action against the 12 member unions and gave an undertaking not to proceed with any disaffiliation until a full hearing of the action, promised for October.

The authority had sought the injunction pending the outcome of its legal action against the ILCU, which it claims is in breach of the Competition Acts.

The case centres on the league's savings protection scheme into which members pay contributions and which exists to pay compensation to credit union members - up to a maximum of €12,600 - in the event that an individual credit union becomes insolvent.

Expulsion from the league would deprive the rebel credit unions of access to the protection scheme or any refund of contributions they had already made to the scheme.

The league last night expressed disappointment at the decision of the Competition Authority to take it to court.

"The league was extremely disappointed to learn that the Competition Authority had issued legal proceedings against the league seeking to prevent it from disaffiliating a small number of credit unions for persistent breach of its rules," chief executive Mr Liam O'Dwyer said.

In a statement, ILCU said it had been engaged in ongoing discussions with the authority in recent months over the league's insurance requirements for member credit unions.

However, last month, as the ILCU prepared to disaffiliate the 12 unions, it received a sharp letter from the authority stressing that any such move would trigger immediate court proceedings.

At that time, the authority gave the ILCU three months to amend the rules on the savings protection scheme.

The Competition Authority claims the league is restricting competition and abusing its dominant position.

It sought the legal undertaking after complaints that disaffected credit unions will forfeit contributions of some €9 million from the the protection scheme for choosing loan protection and savings insurance cover from companies other than ECCU, the insurance subsidiary of the league.

It has been claimed such cover can be obtained at rates 30-40 per cent cheaper than those available from ECCU, whose charges include a levy to fund the ILCU.

The authority claims the ILCU move to disaffiliate is in breach of the Competition Acts because disaffiliation means loss of access and lack of refund from the savings protection scheme and fund.

The authority has initiated proceedings against the ILCU in which it is seeking several orders and declarations, including a declaration that the rules and/or decisions of the ILCU relating to the loss of access and lack of refund from the savings protection scheme on the disaffiliation of a credit union are contrary to the Competition Act 2002.

It also wants injunctions requiring the ILCU to amend its rules so as to allow a credit union which is not affiliated to the ILCU to contribute to and participate in the protection scheme on the same terms as ILCU members.

Yesterday, the authority applied for an injunction restraining the disaffiliation of 19 unions, who are members of the Credit Union Development Alliance, pending the outcome of the authority's action against the ILCU.

Mr Michael Collins SC, for the ILCU, asked that the matter be adjourned saying it was not urgent and there would be no immediate disaffiliation. If there was a decision to disaffiliate, nothing would happen for 40 days and an arbitration process was available to unions who wished to appeal the decision.

He asked the court to instead arrange for an early hearing of the full action.

He added that the league strongly disputed claims that its rules were in breach of the Competition Acts.

After Mr Justice Kearns indicated that, without an undertaking from the league not to disaffiliate the unions at today's meeting, he would grant the interlocutory injunction sought, Mr Collins said he would give the undertaking provided the full action was heard before Christmas.

The judge made directions for the exchange of legal documents and said he would hear the full action in mid-October.