CONSULTATION ON CHANGES TO CREDIT UNIONS LEGISLATION LAUNCHED TODAY
An HM Treasury consultation containing proposed amendments to the Credit Unions Act 1979 was published today.
The document contains seven separate proposals, including suggested changes that, if introduced, would widen credit unions’ ability to borrow from external sources; allow the payment of dividends more than once a year and at different rates; and enable credit unions to charge for the provision of ancillary services like managing bill payments.
Welcoming the publication of the consultation document, Economic Secretary Ruth Kelly said:
“These proposals are aimed at reducing some of the restriction on credit unions’ operational powers, and we are seeking comments on all aspects of the draft proposals, to inform the policymaking process going forward. The credit union movement is known for its diversity, so I hope that a wide range of consultees will respond, to enable Government to take account of all the different perspectives and needs.”
NOTES TO EDITORS
1. The consultation document ‘Proposed Amendments to the Credit Unions Act 1979’ is available through the Treasury website at www.hm-treasury.gov.uk. Printed copies may be obtained by calling Michael Dynan-Oakley on 020 7270 4488. Responses should be returned by 18 January 2002.
2. Credit unions are mutual savings and loan organisations, registered and regulated by the Registry of Friendly Societies (RFS). Staff at the Financial Services Authority (FSA) currently undertake regulatory tasks on behalf of RFS, in accordance with the terms of a service level agreement between RFS and the FSA. Registration and regulation are governed by the Industrial and Provident Societies Acts 1965 to 1968, and the Credit Unions Act 1979.
3. Members save by subscribing for non-transferable shares deposited with a credit union. Members may take out loans, at a maximum rate of interest of 1% per month and, for the majority, up to £5,000 in excess of their shareholding.
4. The main benefits to members are that they have a place to deposit savings, and may apply for loans at reasonable rates of interest.
5. Membership is restricted to those who meet the qualification (‘The common bond”), for a particular credit union. The common bond may be one of four main types: residence in a particular locality; being a member of, or have an association with, an organisation; working for a common employer or in a particular locality; and following a particular occupation. Most credit unions are largely run by unpaid volunteers, they provide basic savings and loan service to low income groups, who may well have no dealings with the commercial banking sector.
6. The consultation document seeks views on seven draft proposals, four of which have been developed from proposals that were first explored under an earlier consultation exercise, conducted in 1998.
7. Government plans to introduce desirable changes by making an Order under the Regulatory Reform Act 2001. On current plan, it is hoped that such changes may be brought into force at the same time the Financial Services Authority introduces its new regulatory regime for credit unions, on 1 July 2002.
8. Media enquiries should be addressed to Liane Farrer in the Treasury press office on 020 7270 5192.