Legalize / United Kingdom / Public General Act

Credit Unions Act 1979

Type Public General Act

Publication 1979-04-04

State In force

Department Statute Law Database

Source legislation.gov.uk

Reform history JSON API

Registration as a credit union

Registration under the Industrial and Provident Societies Act 1965

1

(1) A society may be registered under the Co-operative and Community Benefit Societies Act 2014 (“ the 2014 Act ”) as a credit union if—

(a) it is shown to the satisfaction of the FCA that the conditions specified in subsection (2) below are fulfilled;

(aa) the society has at least 21 members;

(b) the rules of the society comply with section 4(1) below; . . .

(d) the society has made an application for permission under Part 4A of the Financial Services and Markets Act 2000 (in this Act referred to as “the 2000 Act") to accept deposits; ...

(e) the FCA is satisfied that, once registered under the 2014 Act , the society will satisfy, and continue to satisfy, the threshold conditions (within the meaning of section 55B(1) of the 2000 Act) for which the FCA is responsible in relation to the regulated activity of accepting deposits; and

(f) the PRA is satisfied that, once registered under the 2014 Act , the society will satisfy, and continue to satisfy, the threshold conditions (within the meaning of section 55B(1) of the 2000 Act) for which the PRA is responsible in relation to the regulated activity of accepting deposits.

and a society which is so registered by virtue of this section ... is in this Act referred to as, a “credit union".

(1ZA) See section 4 of the 2014 Act for the prohibition on registering a society with withdrawable share capital with the object of carrying on the business of banking.

(1A) The PRA must notify the FCA if it is satisfied as mentioned in paragraph (f) of subsection (1).

(1B) The FCA must not register a society under the 2014 Act as a credit union unless—

(a) if the FCA is the appropriate regulator (within the meaning of section 55A of the 2000 Act), it proposes to give that society permission under Part 4A of the 2000 Act to accept deposits;

(b) if the PRA is the appropriate regulator (within the meaning of section 55A of the 2000 Act), the PRA proposes to give that society permission under Part 4A of the 2000 Act to accept deposits.

(1C) The PRA must notify the FCA if it proposes to give that society permission under Part 4A of the 2000 Act to accept deposits.

(1D) If the FCA registers a society as a credit union , the appropriate regulator (within the meaning of section 55A of the 2000 Act) must determine any outstanding application of that credit union for permission under Part 4A of the 2000 Act to accept deposits as soon as reasonably possible thereafter.

(2) The conditions referred to in subsection (1)(a) above are—

(a) that the objects of the society are those, and only those, of a credit union; and

(b) that the requirements of section 1A (common bonds appropriate to a credit union) and, where applicable, section 1B (further requirements where common bond relates to locality) are met.

(3) The objects of a credit union are—

(a) the promotion of thrift among the members of the society by the accumulation of their savings;

(b) the creation of sources of credit for the benefit of the members of the society at a fair and reasonable rate of interest;

(d) the training and education of the members in the wise use of money and in the management of their financial affairs.

(3ZA) In subsection (3) above references to members do not include corporate members.

(3A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Supplementary and transitional provisions as to registration

2

(1) The following provisions of the 2014 Act do not apply in relation to registration as a credit union—

(a) section 2 (societies that may be registered);

(b) section 4(2) (taking of certain deposits not to be regarded as carrying on the business of banking);

(2) Section 3(2) of the 2014 Act (registration) applies to registration as a credit union as if the reference to compliance with the requirements of that Act were, subject to subsection (1) of this section, to compliance with the provisions as to registration of that Act and this Act.

(3) A society whose objects are wholly or substantially those of a credit union within the meaning of section 1(3) above shall not be registered under the 2014 Act otherwise than as a credit union and, except in the case of a registration made before the commencement of this Act, any such registration shall be void.

(4) A society which at the commencement of this Act is registered under the 1965 Act but whose objects are wholly or substantially those of a credit union within the meaning of section 1(3) above shall take all reasonable steps to have its existing registration cancelled and become registered as a credit union.

(5) Where in accordance with subsection (4) above a society’s existing registration is cancelled on its registration as a credit union, the society shall, notwithstanding anything in section 16(7) or section 3 of the 1965 Act, be taken for all purposes to be the same body corporate before and after the change of registration.

(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Use of name " credit union ", etc.

3

(1) The name of every society registered as a credit union shall contain the words “credit union"or, if the rules of the society state that its registered office is to be in Wales, either those words or the words “undeb credyd".

(2) Subject to subsection (3) below, a person shall not, unless registered as a credit union,—

(a) use in reference to himself a name, title or descriptive expression containing the words “credit union" or undeb credyd or any cognate term or any derivative of those words; or

(b) represent himself as being a credit union;

and any person who contravenes this subsection shall be guilty of an offence and liable on summary conviction to a fine not exceeding level 4 on the standard scale.

(3) Subsection (2) above does not apply to—

(a) the use, in reference to itself, of a name, title or descriptive expression by any body corporate which falls within subsection (3A) below;

(b) the use by any person or unincorporated association with reference to himself (or itself) of a name which has been approved in writing by the FCA ; or

(i) a credit union,

(ii) a body corporate which falls within subsection (3A) below, or

(iii) a person or association which has obtained approval under paragraph (b) above,

of a title or descriptive expression indicating his office or post with that credit union, body, person or association.

(3A) A body corporate falls within this subsection if its head office is not in England, Wales or Scotland and it—

(a) has permission under Part 4A of the 2000 Act to accept deposits;

(b) is exempt from the prohibition imposed by section 19 of that Act in respect of accepting deposits;

(c) has permission under that Act to accept deposits by virtue of qualifying for authorisation under Schedule 3 or 4 to that Act; or

(d) is subject to legal provisions that are similar to the relevant provisions.

(3B) For the purposes of subsection (3A)(d) above, a body corporate is to be treated as being subject to legal provisions that are similar to the relevant provisions if it is subject to legal provisions which—

(a) provide that the main activities carried on by the body are accepting deposits from, and lending money to, persons who are members or shareholders of the body;

(b) require the body to obtain authorisation or approval before it commences business;

(c) require the members and shareholders of the body to be linked by reference to some common chracteristic or circumstance; and

(d) provide that those from whom the body accepts deposits must be shareholders or members of the body (although the legal provisions may allow for some exceptions to this proposition).

(3C) In determining, for the purposes of subsection (3A)(d) above, whether a body corporate is subject to legal provisions that are similar to the relevant provisions, regard must be had as to whether the legal provisions to which it is subject require the body to obtain authorisation or approval before it commences business and whether those provisions—

(a) impose limits on the objects which the body may or must have,

(b) impose limits on the membership of the body,

(d) impose limits or conditions on the body’s ability to accept deposits,

(e) impose limits on the value of the shares which any one shareholder may have in the body,

(f) impose limits on the body’s ability to lend money,

which are similar to those imposed by the relevant provisions.

(3D) In this section—

(a) “legal provisions” includes laws, regulations and administrative provisions;

(b) “relevant provisions” means—

(i) the provisions of this Act; and

(ii) any provision of or made under the 2014 Act or the 2000 Act so far as it relates to credit unions.

(4) For the purposes of section 10(3) and (4) of the 2014 Act (societies which may be permitted to have a name which does not contain the word “limited") the objects of a credit union shall not be regarded as wholly charitable or benevolent.

Rules and membership

Rules

4

(1) The rules of a credit union shall be in such form as the FCA may determine and shall contain—

(a) provision with respect to the matters mentioned in Schedule 1 to this Act; and

(b) such additional provision as the FCA may determine.

(1A) The FCA must consult the PRA before determining any provision under subsection (1)(b) which relates to credit unions which are PRA -authorised persons.

(2) The rules of a credit union may not be amended except by a resolution passed by not less than two-thirds of the members present at a general meeting called for the purpose after the giving of such notice as is by the rules required for such a resolution.

(3) In section 16(4) of the 2014 Act (registration of amendment of rules where not contrary to that Act) as it applies to credit unions, the reference to that Act is to be read as a reference to that Act and this Act.

(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) Section 21 and paragraph 5 of Schedule 3 of the 2014 Act (rules as to fund for purchase of government securities) do not apply to credit unions.

Membership and voting rights

5

(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) A person shall not be a member of a credit union unless he holds at least one fully paid-up share in that credit union, but the rules of the credit union shall not require a person to hold more than £5 in fully paid-up shares as a condition of membership.

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) A member of a credit union who ceases to fall within a common bond and as a result would not qualify for admission to membership shall be entitled, subject to subsection (6) below, to retain his membership unless the rules of the credit union provide otherwise; and... in this Act the expression “non-qualifying member”, in relation to a credit union, means a person who remains a member of the credit union by virtue of this sub-section.

(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7) Non-qualifying members of a credit union shall be left out of account in determining for any purpose whether the requirements of section 1B are met.

(8) A non-qualifying member of a credit union shall be entitled, except so far as the rules of the credit union may provide otherwise, to purchase shares and..., to receive loans.

(9) Subject to any provision in the rules of a credit union as to voting by a chairman who has a casting vote, on every matter which is determined by a vote of members of a credit union every member shall be entitled to vote and shall have one vote only.

(10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Minimum and maximum number of members

6

(1) The minimum number of members of a credit union shall be twenty-one ....

(1A) Accordingly, references in the following provisions to 3 members are to be read as 21 members—

(a) section 3(1)(a)(i) of the 2014 Act as it applies to an application for registration as a credit union;

(b) section 5(3)(b) of that Act as it applies to the cancellation of a credit union's registration;

(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Operation of credit union

7

(1) All shares in a credit union shall be of £1 denomination and may, subject to the rules of the credit union, be subscribed for either in full or by periodical or other subscriptions but no share shall be allotted to a member until it has been fully paid in cash.

(2) Shares in a credit union , other than deferred shares, shall not be transferable and a credit union shall not issue to a member a certificate denoting ownership of a share.

(3) Nothing in subsection (2) above shall affect the operation of section 39(2) of the 2014 Act (transfer in pursuance of nomination on death of nominator).

(4) Subject to subsection (5) and section 11(1C) below, shares in a credit union , other than deferred shares, shall be withdrawable but a credit union shall not issue shares except on terms enabling it to require not less than sixty days’ notice of withdrawal.

(5) Where a credit union has made a loan to a member which is treated by virtue of section 11A(2) below as a secured loan, the member shall not be permitted to withdraw shares where his paid-up shareholding, excluding any deferred shares, in the credit union is, or following the withdrawal would be, less than his total liability (including contingent liability) to the credit union whether as borrower, guarantor or otherwise.

(6) If deferred shares are subscribed for in full, the credit union shall transfer a sum equal to the amount paid on those shares to its reserves.

General prohibition on deposit-taking

8

(1) Subject to sections 9 and 10 below, a credit union shall not accept a deposit from any person except by way of subscription for its shares.

(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deposits by persons too young to be members

9

(1) A credit union may take deposits . . .from a person who is under the age at which, by virtue of any provision of the credit union’s rules, he may become a member of the credit union . . .

(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Power to borrow money

10

(1) A credit union may borrow money . . ..

(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Loans

11

(1) Subject as follows, A credit union may make to a member a loan, upon such security (or without security) and terms as the rules of the credit union may provide.

(1A) A credit union may only make a loan to a corporate member if—

(a) the credit union’s rules provide that it may make loans to corporate members, and

(b) making the loan would not result in the aggregate of the outstanding balances on loans made by the credit union to corporate members exceeding ten per cent of the aggregate of the outstanding balances on all loans made by the credit union to members, or such higher percentage as may be specified.

(1B) Subsection (1) does not apply in relation to a member holding only deferred shares.

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