Shirley Goode, chief executive of Age Concern Birmingham, borrowed a total of £84,000 from the charity, according to its accounts for the year ending 31 March 2012. The accounts say: "The loan is repayable over seven years in monthly instalments. Interest is charged. The balance outstanding at the year end was £72,000."
Its accounts for the following year, which show that the charity had an income of £2.1m over the course of the year, show that the amount outstanding was £60,000.
A spokeswoman for the commission said that after concerns about the loan had been raised, the regulator wrote to the trustees of the charity to ask them to explain how they had decided that the terms and conditions of the loan were in the best interests of the charity.
"The charity has confirmed it has an established and documented loans policy in place that we are satisfied was followed in relation to this loan," she said. "As a result, there is no regulatory role for the commission in this instance."
But although it might be within the remit of the charity to make a loan to an employee, she said, trustees would need to ensure that this was in the interests of the charity and that any conflicts of interest were properly managed.
"We would, for example, expect trustees to properly be able to defend and explain their decisions if and when they are challenged so that donors and supporters can make up their own minds about the charity," she said.
In a statement, Goode said: "My personal loan was taken out at 4 per cent - a rate considerably higher than bank interest, and I stand by the fact that I prefer Age Concern Birmingham to make a profit from my loan."Age Concern Birmingham said in a statement that the loan came from the charity’s reserves and was not taken from public funding or charitable donations. "The higher rate of interest charged actually benefits the organisation," the statement said.
It said that the charity had a policy of lending to its staff from reserves where it was appropriate and had made "several small loans to staff members. These are small amounts, repaid quickly and therefore do not appear in the annual accounts."
The charity said the commission told it that its trustees should be "complimented on their thoughtful handling of the matter".The charity is one of the Age Concerns that decided against signing partnership agreements with Age UK, the charity formed by the merger of Age Concern and Help the Aged in 2010.