The Financial Services and Markets Act 2000 (Consequential Amendments and Transitional Provisions) (Credit Unions) Order 2002

Explanatory Note

(This note is not part of the Order)

This Order makes amendments to the legislation relating to credit unions that are consequential on the expiry, on 2nd July 2002 (“commencement”), of the transitional exemption of credit unions from the general prohibition imposed by section 19 of the Financial Services and Markets Act 2000 (“the Act”). (See article 6 of the Financial Services and Markets Act 2000 (Exemption) Order 2001 (S.I. 2001/1201).) This Order also makes transitional provisions in connection with commencement.

Article 2 amends the Credit Unions Act 1979 (“the 1979 Act”). Section 1 of the 1979 Act is amended so as to provide that the Financial Services Authority (“the Authority”) shall not issue an acknowledgement of registration to a credit union unless the Authority also proposes to give that credit union permission under Part IV of the Act to accept deposits. Provisions of the 1979 Act which relate to matters which are also dealt with under the Act itself are repealed. Similarly, provisions which relate to matters on which the Authority could make rules under the Act are also repealed.

Article 3 revokes certain instruments and regulations which were made under the 1979 Act.

Article 4 modifies the definition of “consumer” in the Act so that it includes those who used the services provided by a credit union before commencement and certain related persons.

Article 5 makes transitional provisions which clarify how the compensation scheme established under Part XV of the Act applies to certain credit unions.

Article 6 provides that section 19 of the 1979 Act (which is repealed by article 2) continues to apply, notwithstanding that repeal, to credit unions whose permission under Part IV of the Act ceases to have effect by virtue of article 3 of the Financial Services and Markets Act 2000 (Permission and Applications) (Credit Unions etc.) Order 2002 (S.I. 2002/704) (failure to reapply for permission when required to do so by a direction given by the Authority).

Article 7 provides that section 39 of the Industrial and Provident Societies Act 1965 (which by virtue of amendments made by article 2 ceases to apply to credit unions) continues to have effect, notwithstanding that amendment, in relation to returns which relate to a period that expired before commencement.

Article 9 permits the Authority to designate as a rule an existing provision (as defined by article 8). Article 10 allows the Authority to modify such existing provisions. Article 11 specifies the consequences of contravening an existing provision which has been so designated. Article 12 relates to the verification of such provisions. Article 13 makes it clear that any designated provision may be revoked or altered after commencement.

Article 14 permits the Authority to make guidance which relates to, or is consequential on, any provision which has been designated under article 9 without complying with the requirements imposed by section 157(3) of the Act (duty to publish a draft etc.). Subject to article 16, in giving such guidance, the Authority must publish a cost benefit analysis.

Article 15 waives the obligation on the Authority to consult before it makes rules (or gives guidance on such rules) where relevant prior consultation (as defined by article 15(3)) has taken place. The Authority must take into account any responses to such consultation before it makes rules pursuant to this article. Subject to article 16, in making such rules (or giving such guidance), the Authority must publish a cost benefit analysis.

Article 16 specifies the circumstances in which the Authority need not publish a cost benefit analysis when it gives guidance or makes rules under article 14 or 15.

Article 17 amends the Financial Services and Markets Act 2000 (Permission and Applications) (Credit Unions etc.) Order 2002 (S.I. 2002/704). The effect of the amendment is that credit unions will, after commencement, have permission under Part IV of the Act to accept deposits from persons who are too young to be members of a credit union.

Article 18 amends the Trustee Savings Banks Act 1985.