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HMT & BIS – reforming the consumer credit regime

We welcome the opportunity to respond to this consultation. ABCUL is the main trade association for credit unions in England, Scotland and Wales, and our members serve around 80% of Britain‟s credit union membership. Credit unions are not-for-profit, financial co-operatives owned and controlled by their members providing safe-savings and affordable loans facilities. Increasingly credit unions offer more sophisticated products such as current accounts, ISAs, Child Trust Funds and mortgages.

The coalition government, like its predecessor, has been clear and consistent in its support for the credit union sector. It committed in its Programme for Government to promote diversity in financial services including a greater role for mutuals. Credit unions have been explicitly identified as part of this agenda consistently by Ministers from across government.

A key element of credit unions‟ current proportionate settlement is their statutory exemption from the Consumer Credit Act under UK law and upheld under the EU‟s Consumer Credit Directive.

If credit unions are to be supported to grow it is imperative – given the size of much of the sector – that regulatory and supervisory burdens are minimised. This provides the requisite room for credit unions to invest time and resource into building sustainability and maximising growth.

We also seek assurances that a proportionate regime will be maintained and extended for our sector in relation to auxiliary credit services, group licensing and fees. Furthermore, we hope that appropriate steps are taken to ensure that consumer detriment – which is a great potential threat in this process of transition – is not caused by mishandling the move or by a dilution of rights and awareness of these rights under the new system of enforcement.

Credit unions play a vital role in providing an alternative financial service to the people of Britain. It is imperative, if this role is to be extended in line with government‟s policy intention, that the erosion of the sector‟s proportionate treatment is not allowed.