This week, long-awaited new credit union legislation has completed its journey through Parliament and was granted royal assent.
Introduced by then-chancellor Nadhim Zahawi MP and supported by Baroness Penn, the Financial Services and Markets Act 2023 will impact a wide range of financial services organisations with a number of changes for credit unions, allowing for new products and services.
According to the Association of British Credit Unions (Abcul), these amendments represent “some of the most significant changes to the Credit Union Act in over 40 years”, and will allow credit unions to offer a range of products to suit the needs of a modern member, including hire purchase and conditional sale agreements, and insurance distribution.
Once the new provisions are in place, credit unions who wish to offer any of the new products or services are required to amend their rules to add the new object (which must then be ratified at a special general meeting or annual general meeting) and apply for a consumer credit licence if looking to offer hire purchase and conditional sale agreements.
“The bill being received will bring pivotal transformation to the credit union sector in Britain,” said Abcul CEO, Robert Kelly.
“Abcul will support member credit unions who wish to take advantage of the changes through thought leadership, facilitating sharing of best practices and practical support. Later this year, we will also release a new set of model rules, which as well as containing the new object, will also reflect how credit unions have changed since the last set was created in 2012.
“I would like to give thanks to the many credit unions and key stakeholders across the country who have made a significant contribution to this change.”
Alongside credit union reforms, the Act introduces new secondary objectives for the Financial Conduct Authority and the Prudential Regulation Authority, to facilitate the growth and international competitiveness of the UK economy. This will be backed up by changes to enhance the scrutiny and accountability of the regulators, including ensuring regular reporting and a greater focus on cost-benefit analyses.
Economic secretary to the Treasury, Andrew Griffith, said: “2023 is proving to be a banner year for reforming our financial services. This landmark piece of legislation gives us control of our financial services rulebook, so it supports UK businesses and consumers and drives growth.”
At the UK’s Co-op Congress in June, Griffith announced a major government review of the Co-operative and Community Benefit Societies Act 2014 and Friendly Societies Act 1992, to be conducted by the Law Commission, beginning this autumn – a move welcomed by Co-operatives UK.
The Financial Services and Markets Act 2023 will also enable the implementation of Lord Hill’s UK Listing Review, added Griffith, “which simplifies the UK prospectus regime – making the UK a better place for companies to IPO.”
In addition, the act
- removes certain restrictions on wholesale markets – implementing the key outcomes of the Wholesale Markets Review
- protects free access to cash in law and introduces new protections for victims of authorised push payment scams
- enables the regulation of crypto-assets to support their safe adoption in the UK
- establishes ‘sandboxes’ that can facilitate the use of new technologies such as blockchain in financial markets.
However, the Bill has received criticism from the Labour Party. Writing for the Co-op Party website, shadow economic secretary to the Treasury and shadow city minister, Tulip Siddiq MP, said that while the Bill did contain some long overdue provisions, such as those for credit unions, “the Conservatives failed to offer an ambitious vision for the sector” – and crucially for the co-operative and mutual sector, failed to address important issues on regulation.
She said: “As shadow city minister, I worked with the Co-operative Party to table amendments to the Bill which would require the regulators – the FCA and PRA – to report on how they have considered mutual and co-operative business models. The FCA’s most recent annual report includes not one mention of the needs of co-operatives, mutuals, building societies or credit unions. While in the latest PRA annual report, building societies are just lumped in with standard banks.
“Every single co-operative and mutual business leader I have spoken to – from Nationwide to the firms represented by the BSA – has called for the regulators to report separately on the specific needs of their sector.”
Siddiq said that despite this, the Conservatives voted down the proposals.
“With the right support, co-operative financial firms have the potential to provide new ideas and solutions to many of the crises and challenges we face as a country, such as the cost-of-living crisis or adapting to climate change,” she added. “That’s why Labour has committed to doubling the size of the co-operative and mutual sector when in government.”