The Government should include credit unions in the statutory scheme that compensates depositors if banks or building societies go bust, a body that represents 16 credit unions said yesterday.

Amid increasing concern about the high rate of delinquent loans in some credit unions, the Credit Union Development Association (Cuda) also called on the Government to establish a task force to reform the sector.

The organisation was set up in 2002 as a breakaway body from the long-established Irish League of Credit Unions (ILCU) on the premise that the movement's structure and business model was seriously outdated.

In a report calling for fundamental reform of the movement and the abolition of self-regulation, Cuda said its own members' assets made up 15 per cent of the €12 billion in assets held by all credit unions in the Republic.

These include big localised credit unions such as those in Tullamore and Newbridge and bodies such as the Prison Service and Comhar Linn INTO credit unions, which have members throughout the State.

Stating that credit unions must adopt "market-based" pricing to ensure better rates for members, Cuda said the movement should improve its governance and "accept the desirability and inevitability of rationalisation". It said credit unions had been losing market share for years and were no longer the cheapest source of credit.

Cuda chief executive Bill Hobbs said the savings protection scheme (SPS) in the ILCU was not an appropriate vehicle to protect the savings of credit union members because the scheme's primary function was the protection of credit unions. Only a simple amendment to the law was required to include credit unions in the compensation scheme that covers banks and building societies, the report said.

"Credit unions would then pay their share of the Central Bank scheme's cost and their members would enjoy the same insurance protection that all consumers of banking services in the country deserve.

"The reality is that even if the League agreed to necessary changes in the governance, funding and operation of its SPS, that scheme is an inferior mechanism for protecting [ the] Irish consumer," the report said.

Cuda cited "troubling" reports about the rising level of bad debts at some credit unions in an analysis that says the movement at large is in danger of decline while savers lack safeguards that are required by law in the bank sector. Claims that the rate of delinquent loans was a result of credit unions serving less well off consumers did not explain the decline in loan quality, it said. "Ireland is getting richer, not poorer."