Financial Services and Markets Act 2023

Section 73

SCHEDULE 14 Credit unions

Introductory

1 The Credit Unions Act 1979 is amended as follows.

Specified financial activities

2 (1) Section 1 (registration) is amended as follows.

(2) After subsection (2) insert—

“(2A) The objects of a credit union are—

(a) each of the mandatory objects specified in subsection (3), or

(b) each of those mandatory objects together with the optional object specified in subsection (3ZZA).”

(3) In subsection (3), in the words before paragraph (a), before “objects” insert “mandatory”.

(4) After subsection (3) insert—

“(3ZZA) The optional object of a credit union is to carry on one or more of the financial activities specified in section 1ZA(1) for the benefit of the members of the society.”

(5) In subsection (3ZA), for “subsection (3)” substitute “subsections (3) and (3ZZA)”.

3 After section 1 insert—

“1ZA Specified financial activities

(1) The financial activities specified for the purposes of the optional object of a credit union (see section 1(3ZZA)) are—

(a) entering into conditional sale agreements, as the seller;

(b) entering into hire purchase agreements, as the person from whom goods are bailed or (in Scotland) hired;

(c) insurance distribution activities.

(2) The Treasury may by regulations specify requirements or restrictions in relation to the carrying on by a credit union of a financial activity specified in subsection (1).

1ZB Power to specify further financial activities

(1) The Treasury may by regulations—

(a) amend section 1ZA so as to specify further financial activities for the purposes of the optional object of a credit union;

(b) make such amendments of this Act, or any other enactment, as appear to them to be appropriate in consequence of any provision made under paragraph (a).

(2) Amendments made by regulations under subsection (1) may, in particular, provide that a credit union may carry on a financial activity specified in the regulations if the credit union has the optional object specified in section 1(3ZZA).

(3) Regulations under section 1ZA(2) made in relation to a financial activity specified in regulations under subsection (1) may, in particular, make provision about fees or other charges payable in respect of the activity or activities that are ancillary to the activity.

(4) Before making regulations under this section, the Treasury must consult such persons as appear to them to be appropriate.

(5) A statutory instrument containing (whether alone or with other provision) regulations under this section may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.”

4 In section 2 (supplementary and transitional provisions as to registration), in subsection (3)—

(a) for “those” substitute “the mandatory objects”;

(b) after “section 1(3) above” insert “(whether or not the society also has the optional object specified in section 1(3ZZA) above)”.

Shares

5 In section 7 (shares), in subsection (5)—

(a) at the beginning insert “Subsection (5A) applies”;

(b) the words from “made a loan” to “secured loan” become paragraph (a);

(c) at the end of that paragraph insert “, or

(b) entered into an agreement mentioned in section 11E(1) with a member, which is treated by virtue of section 11F(2) as a secured agreement.”;

(d) the words from “the member” to the end become subsection (5A).

Ancillary services

6 (1) Section 9A (power to charge for ancillary services) is amended as follows.

(2) In subsection (2), in the words before paragraph (a), for “the activity of accepting a deposit or making a loan” substitute “an activity mentioned in subsection (3)”.

(3) After subsection (2) insert—

“(3) The activities mentioned in this subsection are—

(a) accepting a deposit;

(b) making a loan;

(c) entering into a conditional sale agreement, as the seller;

(d) entering into a hire purchase agreement, as the person from whom goods are bailed or (in Scotland) hired.”

Loans

7 (1) Section 11 (loans) is amended as follows.

(2) In subsection (1)—

(a) omit “to a member”;

(b) at the end insert “, to—

(a) a member, or

(b) another credit union (whether or not a member).”

(3) After subsection (1) insert—

“(1ZA) Where a loan is made under subsection (1)(b) to a credit union that is not a member of the lending credit union, the maximum period within which the loan must be repaid is six months.”

(4) After subsection (7) insert—

“(8) An order under subsection (5) may make different provision in relation to—

(a) loans made to a member;

(b) loans made to a credit union that is not a member of the lending credit union.”

Conditional sale and hire purchase agreements

8 Before section 12 (power to hold land for limited purposes) insert—

“11E Conditional sale and hire purchase agreements

(1) If the objects of a credit union include the optional object specified in section 1(3ZZA) it may (subject to such terms, including as to security, as its rules may provide)—

(a) enter into a conditional sale agreement, as the seller, with a member of the credit union, or

(b) enter into a hire purchase agreement, as the person from whom goods are bailed or (in Scotland) hired, with a member of the credit union.

(2) A credit union may only enter into an agreement mentioned in subsection (1) with a corporate member if—

(a) the credit union’s rules provide that it may do so, and

(b) entering into the agreement would not result in the aggregate of the outstanding balances under all such agreements made by the credit union with corporate members exceeding 10% of the aggregate of the outstanding balances under all such agreements made by the credit union with members, or such higher percentage as may be specified in regulations made by the Treasury.

(3) Subsection (4) applies where—

(a) an agreement mentioned in subsection (1) is entered into by a credit union with a member, and

(b) the agreement is not a secured agreement within the meaning of section 11F.

(4) The terms of the agreement must include provision as to whether, for the duration of the agreement, the member is permitted to withdraw shares where the member’s paid-up shareholding in the credit union is, or following the withdrawal would be, less than the member’s total liability (including contingent liability) to the credit union.

(5) Any interest charged under an agreement mentioned in subsection (1)—

(a) must not exceed the rate specified in subsection (7), and

(b) must be inclusive of all administrative and other expenses incurred in connection with the making of the agreement.

(6) The rate specified in this subsection is 3% per month on the sum outstanding under the agreement.

(7) The Treasury may by regulations amend subsection (7) to substitute a different rate for the rate that is for the time being specified.

11F Agreements to be treated as secured

(1) This section applies where—

(a) a credit union enters into an agreement mentioned in section 11E(1) with a member of the credit union, and

(b) at the time the agreement is entered into, the member’s paid-up shareholding in the credit union is equal to or greater than the member’s total liability (including contingent liability) to the credit union.

(2) On the application of the member to the credit union, the agreement is to be treated for the purposes of this Act as a secured agreement.”

Insurance distribution activities

9 After section 11F (inserted by paragraph 8) insert—

“11G Insurance distribution activities

If the objects of a credit union include the optional object specified in section 1(3ZZA), it may (subject to such terms as the rules of the credit union may provide)—

(a) carry on an insurance distribution activity which constitutes or involves the provision of a service to a member, and

(b) charge such fee as it considers appropriate for providing the service.”

Minor and consequential amendments

10 In section 12 (power to hold land for limited purposes), in subsection (3)—

(a) the words from “making loans” to the end become paragraph (a);

(b) at the end of that paragraph insert “, or

(b) entering into agreements mentioned in section 11E(1) with members on the security of an interest in land and of enforcing any such security.”

11 In section 23A (power to make provision corresponding to provision applying to building societies), omit subsection (5).

12 In section 29 (orders and regulations), in subsection (2) for “section” substitute “sections 1ZB(5) and”.

13 (1) Section 31 (interpretation, etc.) is amended as follows.

(2) In subsection (1), at the appropriate places insert—

• ““conditional sale agreement” means an agreement for the sale of goods under which—

  (a)

  the purchase price or part of it is payable by instalments, and

  (b)

  the property in the goods is to remain with the seller (notwithstanding that the buyer is to be in possession of the goods) until such conditions as to the payment of instalments or otherwise as may be specified in the agreement are fulfilled;”;

• ““enactment” includes—

  (a)

  an enactment contained in subordinate legislation within the meaning of the Interpretation Act 1978;

  (b)

  an enactment contained in, or in an instrument made under, an Act of the Scottish Parliament;

  (c)

  an enactment contained in, or in an instrument made under, Northern Ireland legislation within the meaning of the Interpretation Act 1978;

  (d)

  an enactment contained in, or in an instrument made under, a Measure or Act of the National Assembly for Wales;”;

• ““hire purchase agreement” means an agreement—

  (a)

  which is not a conditional sale agreement,

  (b)

  under which goods are bailed or (in Scotland) hired to a person (“P”) in return for periodical payments by P, and

  (c)

  the property in the goods will pass to P if the terms of the agreement are complied with and one or more of the following occurs—

  (i)

  the exercise by P of an option to purchase the goods;

  (ii)

  the doing by any party to the agreement of any other act specified in the agreement;

  (iii)

  the happening of any event specified in the agreement;”.

(3) After subsection (1A) insert—

“(1B) In this Act, “insurance distribution activity” means any of the following activities—

(a) dealing in rights under a contract of insurance as agent;

(b) arranging deals in rights under a contract of insurance;

(c) assisting in the administration and performance of a contract of insurance;

(d) advising on buying or selling rights under a contract of insurance;

(e) agreeing to do any of the activities specified in paragraphs (a) to (d).

(1C) Subsection (1B) must be read with—

(a) section 22 of the 2000 Act;

(b) any relevant order under that section; and

(c) Schedule 2 to that Act.”

(4) In subsection (4)—

(a) in the words before paragraph (a), omit “(which are replaced by, or are inconsistent with, provisions of the 2000 Act)”;

(b) omit paragraph (b);

(c) omit paragraph (d).

14 In Schedule 1 (matters to be provided for in rules of credit union), in paragraph 9, after “members”, in both places, insert “or other credit unions”.

Transitional provision

15 The amendments made by paragraphs 7(3) and 14 do not apply in relation to a loan made by a credit union to another credit union before the earliest date on which either of those amendments comes into force (whether or not any amount of the loan remains outstanding on or after that date).

16 The amendment made by paragraph 13(4)(b) does not apply in relation to a year of account of a credit union beginning before the date on which that amendment comes in force (and accordingly, sections 77 and 78 of the Co-operative and Community Benefit Societies Act 2014 do not apply in relation to any such year of account).