CRED 13
CRED 13
CRED 13.1
Application and purpose
- 01/12/2004
CRED 13.1.1
See Notes
This chapter applies to:
- (1) [Deleted]
- (1A) a person considering applying to the FSA for approval of the use in a name of the words "credit union" or "undeb credyd";
- (2) a person applying, or considering applying, to the FSA to become authorised as a credit union with a Part IV permission to accept deposits; and
- (3) a candidate, but only as a matter of general relevance.
- 01/12/2004
CRED 13.1.2
See Notes
This chapter gives guidance about:
- (1) what it means to become a credit union with a Part IV permission to accept deposits;
- (2) the application procedures for persons wishing to become a credit union;
- (3) the procedures by which an applicant can obtain approval for persons to perform controlled functions under the approved persons regime; and
- (4) the FSA's decision making procedures for Part IV permission and approved persons applications.
- 01/12/2004
CRED 13.2
Introduction
- 01/12/2004
CRED 13.2.1
See Notes
Registration and becoming authorised as a credit union are two distinct
statutory processes. The Credit Unions Act 1979 sets out the statutory requirements
for registration and the Act sets
out the statutory requirements relating to authorisation. Section 1 of the Credit Unions
Act 1979 as amended provides that a credit
union may not be registered unless it has applied to the FSA for a Part IV permission to accept deposits, and the
FSA shall not issue an acknowledgment of registration to a credit union unless
it also proposes to give the credit union such a permission. If it does issue
an acknowledgment, it should determine any outstanding application for a Part IV permission to accept deposits as soon
as reasonably possible thereafter.
- 01/12/2004
CRED 13.2.2
See Notes
The Authorisation manual (AUTH) explains in full the circumstances in which authorisation is required, the authorisation process and the FSA's powers in relation to authorisation.
- 01/12/2004
CRED 13.2.3
See Notes
AUTH
3.9.3 D requires an applicant for Part IV permission to apply in writing in
the manner directed, and with the information required, in the application
pack provided by the FSA.
- 01/12/2004
CRED 13.2.4
See Notes
The application pack, which is modular,
contains some general forms applicable to all applicants and some specific
to credit union applicants.
The application pack also contains a set of explanatory notes about the information
required and on how to complete the forms.
- 01/12/2004
CRED 13.2.5
See Notes
Applications should be accompanied by
the relevant application fees set by the FSA for
registration and authorisation (see CRED
Sch 3).
- 01/12/2004
CRED 13.2.6
See Notes
The FSA is
committed to an interactive application process. Applicants are encouraged
to contact the FSA's Credit
Union team at an early stage to discuss their plans and proposed application.
In any event, applicants are expected to discuss their plans with the FSA's Credit Union team
before making a formal application. In some circumstances, it may be appropriate
for the FSA to
hold a pre-application meeting with an applicant.
- 01/12/2004
CRED 13.2.7
See Notes
- (1) The application pack and accompanying explanatory notes are available on www.fsa.gov.uk or from the Corporate Authorisation department of the FSA. To contact the Corporate Authorisation department:
- (a) telephone on 020 7066 1000; or
- (b) write to the Corporate Authorisation department at The Financial Services Authority, 25 The North Colonnade, Canary Wharf, London E14 5HS; or
- (c) email corporate.authorisation@fsa.gov.uk.
- (2) Copies of all current guidance are available from the FSA website www.fsa.gov.uk or through the FSA's Publication Enquiries department on 020 7066 3298. The FSA will review its guidance from time to time and may need to amend or withdraw published or written guidance in the light of changing circumstances, developing business practices or case law.
- 01/12/2004
CRED 13.2A
Use of name "credit union"
- 01/12/2004
CRED 13.2A.1
See Notes
Section 3 of the Credit Unions Act 1979 (as amended) makes the following provisions about the use of the name "credit union":
- (1) under section 3(1), every credit union with its registered office:
- (a) in England or Scotland should have "credit union" in its name;
- (b) in Wales should have "credit union" or "undeb credyd" in its name;
- (2) under section 3(2), unless one is registered as a credit union, it is an offence to:
- (a) refer to oneself as a "credit union" or "undeb credyd", or any related words;
- (b) represent oneself as being a credit union;
- subject to section 3(3) (see CRED 13.2A.1 G (3));
- (3) section 3(3) provides that section 3(2) (see CRED 13.2A.1 G (2)) does not apply:
- (a) to specified overseas deposit-takers;
- (b) to a person who has the FSA's written approval;
- (c) where an officer or employee uses a title or descriptive expression indicating his office or post with:
- (i) a credit union; or
- (ii) an organisation in CRED 13.2A.1 G (3)(a) or CRED 13.2A.1 G (3)(b).
- 01/12/2004
CRED 13.2A.2
See Notes
The effect of section 3 of the Credit Unions Act 1979 (see CRED 13.2A.1 G) is that if one of the following organisations, for example, wishes to use the words "credit union" in its name, it will need the approval in writing of the FSA:
- (1) a study group working towards registration as a credit union;
- (2) a body representing or providing services to credit unions.
- 01/12/2004
CRED 13.2A.3
See Notes
Approval for study groups (CRED 13.2A.2 G (1)) will generally be limited to a period
of no more than 2 years.
- 01/12/2004
CRED 13.2A.4
See Notes
The organisations in CRED
13.2A.2 G are subject to the general prohibition mentioned
in CRED
7A.3.2 G (1), which means that they cannot accept deposits.
- 01/12/2004
CRED 13.3
What does registration mean?
- 01/12/2004
CRED 13.3.1
See Notes
On registration, a credit union becomes
a special type of industrial
and provident society, which is a body corporate with limited liability.
- 01/12/2004
CRED 13.3.3
See Notes
A credit union must become authorised under the Act (see CRED 13.5CRED 13.8) before it can undertake the
activity of accepting deposits.
- 01/12/2004
CRED 13.4
Process for registration
- 01/12/2004
CRED 13.4.1
See Notes
- (1) For registration, applicants must demonstrate to the satisfaction of the FSA that the statutory conditions set out in section 1 of the Credit Unions Act 1979 will be fulfilled. CRED 13 Annex 1 G contains a table listing these statutory conditions. CRED 13 Annex 2 G contains information about eligibility for membership of a credit union.
- (a) One of the conditions is that the objects of the credit union are those, and only those, of a credit union. The objects are set out in full in the table. Unless an activity is consistent with these objects, a credit union has no power to engage in it. It is important that a credit union satisfies itself that it has the necessary power before engaging in the activity. For instance, it is clear that a credit union is permitted to receive donations from an outside organisation, so may receive the proceeds from a lottery run by that organisation. Any such organisation will need to be independent from the credit union, with separate management and accounting.
- (b) Another condition is that admission to membership of the credit union is restricted to persons who fulfil an appropriate membership qualification ("AMQ") and that in consequence a common bond exists among the members.
- (2) The application pack contains the relevant forms for registration and explanatory notes on how to complete the forms. The notes also contain information about the appropriate membership qualifications for credit unions.
- (3) CRED 13 Annex 2 G contains information about eligibility for membership of a credit union.
- 01/12/2004
CRED 13.5
What does authorisation involve?
- 01/12/2004
CRED 13.5.1
See Notes
An applicant seeking to carry on the
activity of accepting deposits (a regulated activity) must
seek authorisation by
way of a Part IV permission (so
called because the relevant provisions are contained in Part IV of the Act). For the purposes
of the legislation, members' shares in a credit
union are considered to be deposits (in
the same way that shares in a building
society are considered to be deposits).
- 01/12/2004
CRED 13.5.2
See Notes
Whilst there is a single deposit-taking permission, applicants will need
to decide whether to apply to be a version
1 credit union or a version
2 credit union.
- 01/12/2004
CRED 13.5.3
See Notes
An applicant for Part IV permission must also obtain approval
by the FSA of persons who perform one
or more controlled functions.
The approved persons regime
and controlled functions,
as they apply to credit
unions, are explained in CRED 6.
- 01/12/2004
CRED 13.5.4
See Notes
The FSA's Authorisation manual (AUTH) explains in full the circumstances in which authorisation is required, the authorisation process and the FSA's powers in relation to authorisation. The key chapters of AUTH for a person applying, or considering applying, to the FSA to become a credit union with a Part IV permission to accept deposits are:
- (1) AUTH 3: Applications for Part IV permission;
- (2) AUTH 4: Authorisation fees;
- (3) AUTH 6: Approved persons; and
- (4) AUTH 8: Determining applications.
- 01/12/2004
CRED 13.6
Process for Part IV permission
- 01/12/2004
CRED 13.6.1
See Notes
The nature of the information and documents requested by
the FSA for
a Part IV permission,
in the application pack, or in subsequent requests, will be proportional to
the risks posed by firms.
For instance, in the case of credit
unions, the risks posed by an applicant seeking permission to carry out
the activities of a version
2 credit union will normally be greater than those of an applicant
seeking to become a version
1 credit union. Similarly, the risks will be greater for an
applicant with a widely-drawn common bond.
- 01/12/2004
CRED 13.6.2
See Notes
The FSA will typically require the following information from all applicants as a minimum:
- (1) a business plan which describes the regulated activities and any unregulated activities which the applicant proposes to carry on, the management and organisational structure of the applicant and details of any proposed outsourcing arrangements;
- (2) appropriately analysed financial budget and projections which demonstrate that the applicant expects to comply with the relevant financial resources requirements applicable to credit unions (see CRED 5.2.1 G (4), CRED 8 and CRED 9);
- (3) details of the systems to be used, and the controls to be put in place, for the running of the credit union (see CRED 4.3);
- (4) details of the individuals to be involved in the running of the credit union, particularly those performing one or more controlled functions for whom approved persons status will be required (see CRED 6.3);
- (5) a statement from two directors of the applicant's committee of management confirming, to the best of their knowledge, the completeness and accuracy of the information supplied; and
- (6) confirmation of insurance against fraud or other dishonesty (see CRED 7A.4.1 R CRED 7A.4.3 R).
- 01/12/2004
CRED 13.6.3
See Notes
The FSA will
begin its formal process of consideration once it has received an application
made using the application pack. During this process, the FSA may consider it appropriate to ask for
additional information, undertake additional lines of enquiry or seek verification
from third parties of the information provided to it by the applicant. The FSA will normally want
to meet with the applicant's management team, in their own area, to discuss
their application. As part of its assessment, the FSA will consider whether the applicant is
ready, willing and organised to comply with the regulatory requirements to
which it will be subject if it is granted Part IV permission to carry on the regulated activities referred
to in its application.
- 01/12/2004
CRED 13.6.4
See Notes
As part of its application for Part IV permission, an
applicant may wish to apply for certain limitations or requirements (see AUTH 3.6, AUTH 3.7 and the application
pack). Applicants
applying to be a version
1 credit union will need to apply for the appropriate requirement to define
the scope of its Part IV
permission (details of which are given in the application pack).
- 01/12/2004
CRED 13.6.5
See Notes
The FSA may decide to grant an application for Part IV permission subject to limitations or requirements. For example, the FSA:
- (1) can impose limitations, for example, to limit the number of customers from whom the credit union can accept deposits during an initial period of operation; this might be used where, for example, a credit union's systems are not yet adequate to be able to process a high volume of transactions; and
- (2) the FSA can impose requirements, for example, to restrict the scope of a credit union's Part IV permission to carry on regulated activities or require a credit union to submit financial returns more frequently than normal (see AUTH 3.7).
- 01/12/2004
CRED 13.6.6
See Notes
Where the FSA decides to impose limitations or requirements not requested by the applicant,
these will be discussed with the applicant, and the applicant will be informed
in writing and given the opportunity to make representations before the FSA reaches a final decision.
- 01/12/2004
CRED 13.6.7
See Notes
An applicant which has been granted a Part IV permission by
the FSA is authorised. The FSA will inform the applicant, in writing,
of the effective date of the authorisation.
A credit union should
not commence its regulated
activities before receiving this written notice. When a credit union is authorised, a general description
of the activities it has been authorised to
carry on will be recorded in the FSA
Register which will be accessible by the public.
- 01/12/2004
CRED 13.6.8
See Notes
If a Part IV permission is given, the FSA will expect the credit union to operate
in accordance with its business plan. Credit
unions are advised to discuss any problems with commencing a regulated activity with
their usual supervisory contact at the FSA.
If the FSA consider
it appropriate to vary or cancel a credit
union's Part
IV permission (see
ENF 3 and ENF 5), it will discuss the proposed action
with the credit union and
ascertain its reasons for not commencing or carrying out the regulated activity, or
activities, concerned as described in its application.
- 01/12/2004
CRED 13.6.9
See Notes
The FSA has
six months from
the date of receipt of a completed application to make its determination about
whether to grant a Part
IV permission. However, where the FSA receives an application in respect of
a Part IV permission which
is incomplete, it has up to 12 months to
make its determination. This provides time for the applicant to provide the FSA with the information
required to complete the application.
- 01/12/2004
CRED 13.7
Applying for approved persons status
- 01/12/2004
CRED 13.7.1
See Notes
The approved
persons regime and the controlled
functions that apply to credit
unions with a Part
IV permission to accept
deposits are explained in more detail in CRED 6.3.
- 01/12/2004
CRED 13.7.2
See Notes
An applicant for Part IV permission must take reasonable care
that it has applied in respect of all persons who
will be performing controlled
functions for approval by the FSA. A person cannot
commence performing a controlled
function until it has been approved by the FSA. Applicants planning to outsource the
performance of one or more controlled
functions should discuss the approved persons requirements with their usual supervisory
contact at the FSA.
- 01/12/2004
CRED 13.7.3
See Notes
AUTH 6.3.1 D requires an applicant for Part IV Permission to complete Form A (included as part of the FSA's application pack) when applying for approval of a person to perform a controlled function.
- 01/12/2004
CRED 13.7.4
See Notes
The FSA's application
pack includes explanatory notes on how to complete the approved persons forms.
- 01/12/2004
CRED 13.7.5
See Notes
The FSA has
to process complete approved
person applications within three months of receipt, but it will aim to come
to a decision more quickly than this whenever circumstances allow. Where the FSA has to request additional
information, the elapsed time from receipt of the application to determination
may be more than three months to
make a determination about the application.
- 01/12/2004
CRED 13.7.6
See Notes
The FSA may
grant an application only if it is satisfied that the candidate is a fit and proper person to perform the controlled function stated
in the application form. The criteria used by the FSA in making this judgement are covered
in CRED 6.4. Responsibility lies with the applicant to satisfy
the FSA that
the candidate is
fit and proper to perform any controlled
function applied for.
- 01/12/2004
CRED 13.7.7
See Notes
AUTH
6.3.4 D requires that, until an application for approval
has been determined by the FSA,
the applicant must inform the FSA of
any significant change to the information given in Form A immediately.
- 01/12/2004
CRED 13.7.8
See Notes
- 01/12/2004
CRED 13.8
The FSA's decision making procedures
- 01/12/2004
CRED 13.8.1
See Notes
The FSA's decision
making procedures in relation to authorisations under
the Act (that
is, Part IV permissions or
approval of a person)
are set out in AUTH 8. The FSA will, to the extent appropriate, apply
similar procedures to the registration process.
- 01/12/2004
CRED 13.8.2
See Notes
- 01/12/2004
CRED 13.8.3
See Notes
Where FSA staff recommend:
- (1) the refusal, or proposed refusal, of:
- (a) an application for Part IV permission; or
- (b) an application for approval under the approved persons regime; and
- (2) the granting or proposed granting of an application for Part IV permission subject to a limitation or requirement which was not applied for by the applicant;
the decision has to be referred to the RDC. The status, composition and operating procedures of the RDC are explained in AUTH 8.2 and DEC 4.
- 01/12/2004
CRED 13.8.4
See Notes
Where an applicant's case has been referred to the RDC, and the RDC decide to give a warning notice to the applicant, or in the case of applications for approval under the approved persons regime, to all interested parties, the applicant can make written and oral representations to the RDC. Where the RDC decides not to grant an application, the FSA will inform the applicant or, in the case of applications for the approval of individuals under the approved persons regimes, all interested parties in writing. There is scope, in such circumstances, for the applicant to refer the FSA's decision to the Tribunal before a final decision is made about a case. The status and procedures for referring cases to the Tribunal are explained in AUTH 8.3 and DEC 5.
- 01/12/2004
CRED 13.8.5
See Notes
Decisions which may be taken by internal staff procedures include:
- (1) decisions to grant an application for Part IV permission on the terms applied for; and
- (2) decisions to grant an application for approval under the approved persons regime.
- 01/12/2004
CRED 13.8.6
See Notes
The FSA's internal
staff procedures are intended to ensure that decisions will, so far as possible,
be taken by FSA staff
with a good knowledge and understanding of the application concerned, the
relevant risks to the FSA's regulatory objectives and
other relevant factors in the general context of the application. These internal
staff procedures are also designed to ensure that decisions made are subject
to appropriate individual oversight.
- 01/12/2004
CRED 13 Annex 1
Requirements of Registration
- 01/12/2004
See Notes
| REQUIREMENT | SECTION OF THE RELEVANT ACTS | |
| That the objects of the society are those, and only those of a credit union. | Credit Unions Act 1979, s.1(2)(a) | |
| The objects of a credit union are: | ||
| the promotion of thrift among the members of the society by the accumulation of their savings | Credit Unions Act 1979, s.1(3) | |
| the creation of sources of credit for the benefit of the members of the society at a fair and reasonable rate of interest | Credit Unions Act 1979, s.1(3) | |
| the use and control of the members' savings for their mutual benefit | Credit Unions Act 1979, s.1(3) | |
| the training and education of the members in the wise use of money and in the management of their financial affairs | Credit Unions Act 1979, s.1(3) | |
| That admission to membership of the society is restricted to individuals all of whom fulfil a specific qualification which is appropriate to a credit union (and that in consequence a "common bond" exists between members). | Credit Unions Act 1979, s.1(2)(b) | |
| The appropriate membership qualifications ("AMQs") for a credit union are: | ||
| following a particular occupation | Credit Unions Act 1979, s.1(4)(a) | |
| residing in a particular locality | Credit Unions Act 1979, s.1(4)(b) | |
| being employed in a particular locality | Credit Unions Act 1979, s.1(4)(c) | |
| being employed by a particular employer | Credit Unions Act 1979, s.1(4)(d) | |
| being a member of a bona fide organisation or being otherwise associated with other members of the society for a purpose other than that of forming a society to be registered as a credit union | Credit Unions Act 1979, s.1(4)(e) | |
| residing in or being employed in a particular locality | Credit Unions Act 1979, s.1(4)(f) | |
| and such other qualifications as are for the time being approved by the FSA | Credit Unions Act 1979, s.1(4) | |
| The following qualifications (in addition to those set out in section 1(4) of the Credit Unions Act 1979) have been approved by the FSA or its predecessor, the Registry of Friendly Societies: | ||
| being currently in receipt of a continuing and regular contractual payment arising from employment by a particular employer | Credit Unions Act 1979, s.1(4) | |
| being currently in receipt of a continuing and regular contractual payment arising from employment by particular employers in a particular area | Credit Unions Act 1979, s.1(4) | |
| being currently in receipt of a continuing and regular payment arising from participation in the provision of a public service of a particular nature, or of particular services associated with such participation | Credit Unions Act 1979, s.1(4) | |
| residing in a particular locality, or being a member of a bona fide organisation or group of organisations (or otherwise having a continuing and active association with one or more of such organisations) existing within that locality for a purpose other than that of forming a society to be registered as a credit union | Credit Unions Act 1979, s.1(4) | |
| That the rules of the credit union are in a form as agreed by the FSA and provide for all matters required by the legislation. | Credit Unions Act 1979, s.4(1) and Schedule 1 | |
| That the registered office of the credit union is in Great Britain. | ||
| That a suitable name is chosen for the credit union. | Credit Unions Act 1979, s.3 | |
| for credit unions with their registered office in England or Scotland their name must always include the words 'Credit Union' and have 'Limited' as the last word in the name | Credit Unions Act 1979, s.3(1) and 3(4) | |
| for credit unions with their registered office in Wales their name may use 'undeb credyd' instead of 'Credit union' and 'cyfyngedig' instead of 'Limited' | The Welsh Language Act 1993, s.28 and 29 | |
| That the credit union has at least 21 members. | Credit Unions Act 1979, s.6(1) | |
| only individuals can be members of a credit union | Credit Unions Act 1979, s.5(1) | |
| an individual is not a member of a credit union unless he holds at least one fully paid-up share in that credit union | Credit Unions Act 1979, s.1(6) | |
- 01/12/2004
CRED 13 Annex 2
Eligibility for membership of a credit union
- 01/12/2004
See Notes
| Admission of members | |||
| 1. | It is a condition of registration of a credit union that its membership is restricted to persons who fulfil (directly or indirectly) the qualification stated in the credit union's registered rules (section 1(2) of the Credit Unions Act 1979). | ||
| Categories of membership | |||
| 2. | Eligibility for membership of a credit union is determined by its registered rules. Each member of a credit union should fall within one of the following categories. | ||
| (1) | Category 1. Directly qualifying member | ||
| A directly qualifying member is a person who: | |||
| (a) | meets the membership criteria set out in the credit union's registered rules (section 1 of the Credit Unions Act 1979); and | ||
| (b) | is above the age of 16 (unless the credit union's registered rules stipulate a higher age) (section 20 of the Industrial & Provident Societies Act 1965). | ||
| Note: | A member who is under the age of 18 may not be a member of the committee, trustee, manager or treasurer of the credit union (section 20 of the Industrial & Provident Societies Act 1965) or receive a loan (section 11(1) of the Credit Unions Act 1979). | ||
| (2) | Category 2. Indirectly qualifying member | ||
| An indirectly qualifying member ("family member") qualifies only through a directly qualifying member (Category 1 above). This category of membership is available only if the registered rules of the credit union provide for it explicitly. | |||
| An indirectly qualifying member ("family member") is a person who is: | |||
| (a) | a member of the same household as; and | ||
| (b) | a relative of another person who is; | ||
| a directly qualifying member of the credit union (section 1(6) of the Credit Unions Act 1979). | |||
| (3) | Category 3. Non-qualifying member | ||
| A person in this category would originally have joined the credit union as a directly qualifying member (Category 1 ) or indirectly qualifying member ("family member") (Category 2 ). This category of membership is available unless the credit union's registered rules provide otherwise. The number of non-qualifying members should not at any time exceed ten per cent of the total membership of the credit union (section 5(6) of the Credit Unions Act 1979). The registered rules of a credit union should make provision for terminating the membership of members in order to comply with this limit (paragraph 13 of Schedule 1 to the Credit Unions Act 1979). | |||
| A non-qualifying member is a person who has ceased to fulfil the membership qualification; that is to say a person who: | |||
| (a) | joined the credit union as a qualifying member (whether qualifying directly or indirectly); but | ||
| (b) | later ceased to qualify (section 5(5) of the Credit Unions Act 1979). | ||
| Note: | When directly qualifying members become non-qualifying members, then all members who qualified indirectly through them will also become non-qualifying members (unless subsequently by some other route they have themselves become either directly qualifying members or indirectly qualifying members). A person who is eligible for membership under more than one category will hold membership under the higher of those categories (so, for example, someone who is eligible under Categories 1 and 2 will be regarded as a Category 1 member, and someone who is eligible under Categories 2 and 3 will be regarded as a Category 2 member). | ||
| Category of Membership | |||
| Category 1 | Category 2 | Category 3 | |
| Directly qualifying member | Indirectly qualifying member ("family member") | Non-qualifying member | |
| DQM | IQM | NQM | |
| Fulfils the membership qualification set out in the common bond rule of the credit union | Lives in the same household as, and is a relative of, a DQM | Has ceased to be a DQM or IQM | |
| Persons too young to be members | |||
| 3. | A person too young to be a member ("juvenile depositor") may make deposits with a credit union (section 9 of the Credit Unions Act 1979). A person too young to be a member ("juvenile depositor") is a person who: | ||
| (1) | is below the age of 16 (unless the credit union's registered rules stipulate a higher age for entry) (section 20 of the Industrial & Provident Societies Act 1965); and | ||
| (2) | would qualify for membership (directly or indirectly) if he were old enough. | ||
| This means that in a qualification of residing in a particular locality, an eligible juvenile depositor should reside there (because indirect qualification means being a member of the same household as well as a relative of a DQM). In a qualification of being employed in a particular locality, a juvenile depositor is eligible by going to school or college there. | |||
| Note: | These deposit's are not shares and these depositors are not members. | ||
| Status of transactions | |||
| 4. | Credit union's may only undertake the activities authorised by their registered rules. If they purport to undertake wider activities, then any transactions arising from such activities are void. Any transactions with an ineligible person are unenforceable. | ||
| 5. | If a credit union becomes aware that it has admitted ineligible persons as "members", it should immediately take steps to: | ||
| (1) | reclaim any loans made to such persons; and | ||
| (2) | repay to such persons any sums they have deposited with the credit union by way of share purchase. | ||
| 6. | There are legal rights - such as the doctrine of unjust enrichment - that should enable a credit union to recover funds lent to such persons. Similar principles should apply to enable such persons to recover any funds deposited with the credit union. | ||
| 7. | If a credit union discovers that it has admitted to membership a significant number of ineligible persons, it should inform the FSA at the earliest opportunity to discuss the implications and the way forward. | ||
| Extension of common bond | |||
| 8. | Transactions with an ineligible person are not validated if that person subsequently becomes eligible for membership through, say, an extension of the common bond. Although a newly registered common bond extension allows a credit union to admit members in the additional area, it does not have retrospective effect for those who were erroneously admitted before the extension. If funds are not to be returned in accordance with the guidance given under "Status of Transactions" (paragraphs 4 to 7), immediate steps will have to be taken to ensure that proper business relations commence - and are shown to commence - after the common bond extension has been effected. The following steps should generally be taken: | ||
| (1) | the credit union should issue a new pass book; | ||
| (2) | share deposits and loans should be started again - stating the current position - being entered as new transactions in the new passbook. | ||
| Powers available under other Acts | |||
| 9. | This annex draws attention to a number of offences under the Industrial & Provident Societies Act 1965 and the Credit Unions Act 1979. The existence of these offences does not preclude the FSA from using any other powers that are available to it under the Act. | ||
| 10. | A credit union, officer, member or other person who does anything forbidden by credit union legislation is liable on summary conviction to a fine not exceeding level 3 on the standard scale (currently £1,000) (section 61(b) of the Industrial & Provident Societies Act 1965 and section 28(1) of the Credit Unions Act 1979). | ||
| 11. | The registration of a credit union may be cancelled on proof that it has wilfully and after notice from the FSA violated any of the provisions of the Industrial & Provident Societies Act 1965 or Credit Unions Act 1979 (section 20 of the Credit Unions Act 1979). | ||
- 01/12/2004