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ABCUL Response to Electronic Communications in the Mutual Sector

Electronic Communications in the Mutual Sector – a consultation  

Response to HM Treasury from the Association of British Credit Unions Ltd (ABCUL)

January 2011

Introduction

We welcome the opportunity to respond to this consultation.  ABCUL is the main trade association for credit unions in Britain. The Association represents approximately 70% of credit unions in England, Scotland and Wales who in turn represent about 85% of credit union membership.  Credit unions are not-for-profit, financial co-operatives owned and controlled by their members. 

At the end of March 2010, credit unions in Great Britain were providing financial services to 761,708 adult members and held £599 million in deposits with £474 million out on loan to members.  There were also 107,077 young people saving with credit unions. [1]

Credit unions vary greatly in size from under 200 members to over 20,000 members.  Many do not employ staff, or employ minimal staff.  It is therefore important that unnecessary burdens are not inadvertently created, and proportionality remains in place for credit unions. 

We have confined our responses to the questions which will affect credit unions, as Industrial and Provident Societies.   We have consulted with our members on this issue on 2 occasions; in August 2010 when HM Treasury carried out an informal consultation, and in December 2010 /January 2011, during the period of this consultation.  We have also encouraged conversations on our members’ forum and held informal discussion with a number of members. 

The first consultation resulted in 45 responses from a wide variety of credit unions – varying in size from less than 500 members to more than 10,000 members, and with a variety of membership qualifications, including live or work, employment and associational.  The second consultation resulted in a smaller number of responses (5).  We believe that this is due to much of the consultation period taking place during the Christmas and New Year period and also due to the fact that we had consulted on this a few months previously.

We have outlined the response from our members to the questions below, where appropriate, and we have used this information to form our response which reflects these views and takes into account the varying needs of credit unions and the resources they have available to them. 

Should any further information be required, we would be very happy to provide this.      

Consultation Response

10        Annual returns. Do you agree that, in the case of website access, the return should be published on a website until that return ceases to be the latest for that society?

The first time we consulted on this issue (in August 2010), 72% of credit unions stated that they would be likely to use a new power to provide members with a copy of the last audited accounts on their website, rather than providing members who request this with a printed copy. 

In our December 2010 consultation we asked members if returns should be published on website until that return ceased to be the latest.  Three members agreed with this proposal, and 2 disagreed. 

A number of credit unions have commented that they agree with this proposal as long as it is not compulsory, as many credit unions do not have the capacity for this. 

We also received a large number of comments from credit unions which, although happy to use electronic communications to help their members access accounts on the website, were not happy for this to be in a public area on their website. 

ABCUL Response

ABCUL believes that as long as this change does not require credit unions which do not wish to do so to publish returns on their website, then this is a positive change which credit unions with the capacity to upload returns to their website could choose to benefit from.

We understand that members may wish to refer to the documents at any point and so do not see a problem with requiring credit unions to keep the returns on their website until the documents cease to be the latest for that credit union. 

We also agree that credit unions should not be held liable for any offence if any failure to have the return on their website is beyond their control. 

We would also like to stress that this requirement should not require credit unions to have the documents hosted on a public section of their website.  It is essential that credit unions should be able to choose to host the return on a password protected section of the website to which they can provide a URL to members who request a copy of the documents. 

11        Registers of members.  a Are you content with the new requirement to keep electronic addresses on the register, and that breach of this requirement is potentially a criminal offence.

We asked members this question in our second consultation.  2 members agreed with this proposal, 2 didn’t and 1 did not know. 

ABCUL Response

We understand that credit unions will be able to choose whether or not to take advantage of the ability to communicate with their members electronically, instead of by post.  We therefore do not see a problem with credit unions which wish to use electronic communications to send information to their members which is related to the democracy of the credit union to included these electronic addresses on the Register of Members

b Is there adequate provision for the situation where it appears to a society that an electronic address that it holds for a member is no longer current?

All credit unions answering this question agreed that they should be able to remove invalid addresses and pointed out they have an obligation to ensure data is accurate through the Data Protection Act and that email addresses change frequently and the Register of Members should be amended when changes are made, as a matter of course. 

ABCUL Response

It is essential that credit unions are able to remove invalid addresses from this Register, should they find out – by bounce-backs or otherwise – that an email address is invalid.  If an invalid email address remains on the Register, members may not receive important information related to the democracy of the credit union.  If provision is in place to remove invalid addresses, any member whose email address becomes invalid will instead be able to receive this information by post.  We would therefore recommend a similar provision to that applying to Friendly Societies to be included for credit unions and I&P Societies. 

12        Use of names. Are you content that societies will be put in a similar position to trading companies with regard to the use of the registered name of their websites, or the websites of third parties which they cause to be placed, and that breach of these provisions may be a criminal offence?

The majority of members responding to this question (75%) were in agreement with this proposal. 

ABCUL Response

We would agree with this proposal to ensure that members are able to easily ascertain the legal trading name of the credit union, and seek further information from regulators, should they have a need to do so. 

We would be concerned if anything but credit unions’ own websites, and those which they have editorial control over and access to were included in this provision.  As one respondent pointed out ‘it would be impractical to police external websites, but happy to do this on anything we control’. 

ABCUL has recently launched www.findyourcreditunion.co.uk, which is a search site containing a page for every credit union in Great Britain.  A statutory field for the registered name of the credit union is included in here.  Credit unions have the ability to register for access to edit this page so would be able to edit the registered name field, should they change this at any point.  Other websites which contain information about a credit union – such as those of partners, supporters, sponsoring organisations etc – may not be as easily accessible. We would assume that ‘cause to be placed’ would mean that credit unions have access to, so if that is the case we are comfortable with this move.

For credit unions with a website it is likely that the information on partners’ website will provide a link back to the website of the credit union.  This would contain full information about the registered name of the credit union and its FSA registration number.  We believe that this would provide sufficient clarity for members and potential members seeking information about legal and regulatory status of the credit union. 

13        Communications with the FSA.

a Are the amendments to section 72, and the new 72A, appropriate?

b Are any specific provisions of the 1965, 1968 and 1979 Acts, or other legislation, inconsistent with the electronic submission of documents to the FSA and need amendment?

ABCUL Response

We support any provisions to enable electronic communications with the FSA and its successors.  It would also be useful if provision were made to enable registration documents to be submitted electronically where possible.  We look forward to a review of this once reforms to financial regulation are completed. 

Other issues

1      We welcome the statement in the consultation document that the Government is not minded to extend the requirement contained in Section 40 of the I&P Act 1965 to display a copy of the current balance sheet on a credit unions’ website. 

We would have had concerns that this would be a burden to credit unions, especially smaller credit unions and is replicating a piece of I&P legislation which does not apply to companies.  The majority of respondents who answered this question in our August 2010 survey were uncomfortable with this requirement, and a number felt very strongly about this, especially those with basic websites. 

Only 2% of credit unions were aware of credit unions viewing/ requesting to view the balance sheet and, should members ask for this information electronically, credit unions would be happy to supply the information to the members individually. 

ABCUL January 2011

[1] Figures from unaudited quarterly returns provided to the Financial Services Authority

Attached documents