Changes to credit union legislation in Great Britain

The Financial Services and Markets Act 2023 was given Royal Assent on 29 June 2023. The Act sets out changes to credit union legislation in Great Britain. These changes came into force (commenced) on 29 August 2023.

We wrote to credit unions in Great Britain about these changes in June and again in August 2023. This page provides further information on the legislative changes.

The changes include increasing the range of products or services a credit union can offer. It will be up to each credit union to decide whether to offer these. If you do want to offer the additional products and services, you need to complete several steps first, including:

• Passing any necessary rule amendments and submitting these for registration with us.
• Applying for, and obtaining, relevant permission under the Financial Services and Markets Act 2000 (FSMA) if you do not have them already.

If you do not want to take advantage of these changes relating to products and services, you do not need to take any action.

The changes

The Financial Services and Markets Act 2023 changes the Credit Unions Act 1979 (CUA79). Section 73 and Schedule 14 of the Act provide the details of these. The key changes are summarised below.

New optional object

Credit unions will be able to choose to adopt an additional object (PDF): ‘to carry on one or more of the financial activities specified in s1ZA(1) for the benefit of the members of the society.’

New financial activities

Section 1ZA(1) of CUA79 covers these new activities:

• (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

Credit unions need to have permission under the FSMA before carrying on or agreeing to carry on any of these regulated activities.  

Other additional sections proposed for CUA79: 

• Section 11E covers conditional sale and hire purchase agreements.
• Section 11F deals with secured conditional sale and hire purchase agreements. 
• Section 11G covers insurance distribution activities.

Section 31 of CUA79 is amended to include definitions of the above.

Section 9A of CUA79 allows credit unions to charge for services that are ancillary to the making of loans or taking of deposits. This power is broadened to allow a credit union to charge for services ancillary to entering into conditional sale or hire purchase agreements.

Annual accounts and financial year-ends

Under CREDS 8.2.6R, credit unions in Great Britain must submit annual accounts to the FCA within 6 months of the end of their financial year. These accounts get published on the Mutuals Public Register.

Moving forward, it is proposed that credit unions will be required to send annual returns (as described in section 89 of the Co-operative and Community Benefit Societies Act 2014) to the FCA within 7 months of the end of your financial year.  

This does not require any additional action for you. Submitting your signed and audited accounts to us annually on time will meet both the CREDS requirement and the legislative requirement.  

Credit unions must also follow sections 77 and 78 of the Co-operative and Community Benefit Societies Act 2014, on how to calculate the financial year-end date and procedures for specifying a different one.

Taking advantage of the changes

Changing your financial year-end

Your current registered financial year-end appears on the Mutuals Public Register. To change this, complete and submit this form.

Expanding objects and powers

Now the Act has commenced, if your credit union wants to take advantage of the new powers, you need to: 

1. Get agreement to amend your rules to include the new additional object. Your current rules set out the process within your credit union for member agreement to rule amendments. 

2. Submit that rule amendment to us for registration. Where you are just adding the additional object, you can submit a partial rule amendment using this form. See further information on wording for the optional object (PDF).

If you are making this change along with others, you may wish to submit a complete amendment of rules.

3. Once we have registered that rule change, a credit union must ensure its Part 4A permission under FSMA includes the relevant regulated activities. Only include the regulated activities you intend to use. Read more about how to apply to us if your credit union intends to carry out consumer credit activities.

The activities you may want to add in your permission include: 

• Entering into a regulated credit agreement as Lender (Excluding high-cost short-term credit, bill of sale agreement, and home collected credit agreement)
• Exercising, or having the right to exercise, the lender's rights and duties under a regulated credit agreement (excluding high-cost short-term credit, bill of sale agreement, and home collected credit agreement)
• Insurance distribution activities. See the Handbook for more information.

A small number of firms may have already had the relevant regulated activities included in their permission. For instance, those firms providing insurance mediation ancillary to making loans should have already had the relevant activity included in their permission.

You still need to take action before using the new powers to provide products or services detailed above.

If you already had the necessary permission for the activity you want to carry out (and therefore didn’t need to submit a Variation of Permission application) and have had your rule amendments registered, you can start that activity.

Where starting that activity is a change to your business model, you should submit a SUP15 notification to us. See SUP15.3.8G(1) for further details.