Compensation scheme for credit union members

John Milne, head of FSA credit unions regulation said:

"A sound and effective investor protection scheme is a key factor for public confidence in the credit union movement and for its future growth. From the middle of next year credit union members will come under the Financial Services Compensation Scheme and will thus be protected in the same way as depositors with banks and building societies.

The consultation paper also sets out the proposed future arrangements covering complaints members may have about how they have been treated by their credit union. Each credit union will be required to have an efficient complaint handling system and where a complainant is not satisfied with how his complaint has been handed he will be able to refer the matter to the Financial Ombudsman Service.

Notes for editors

1. Consultation Paper 94 Credit Unions: consumer compensation and consumer complaints is available on the FSA Website www.fsa.gov.uk under Publications. Responses should be sent to the FSA by 20 July 2001.

2. The Treasury announced on 16 November 1999 that credit unions would come within the scope of FSA regulation under the Financial Services and Markets Act. The new regime, including credit unions' participation in the Financial Services Compensation Scheme and the Financial Ombudsman Service, is due to come into effect from 1 July 2002.

3. The FSA set out its overall plans for the future regulation of credit unions in Consultation Paper 77 The Regulation of Credit Unions, published on 4 December 2000, which is available on the FSA Website under Publications.

4. Credit unions are mutually owned financial co-operatives established under the Credit Unions Act 1979. The objects of a credit union are stated in the 1979 Act to be:
   • the promotion of thrift among members
   • the creation of sources of credit for members at a fair and reasonable rate of interest
   • the use and control of members savings for their mutual benefit
   • the training and education of members in the wise use of money and in the management of their financial affairs.

5. There are 686 credit unions registered in Great Britain with a membership of 293,000 and assets of 180 million.

6. Credit unions are currently registered by the Registry of Friendly Societies and are supervised by FSA staff under contract to the Chief Registrar of Friendly Societies.

7. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; the protection of consumers; and fighting financial crime.

8. The FSA aims to maintain efficient, orderly and clean financial markets and help retail consumers achieve a fair deal.