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FCA – Call for Input – Retained Provisions of Consumer Credit Act Review

Response to the consultation

Credit unions’ main lending business – i.e. lending to credit union members without the involvement of a third party – is exempt from the Consumer Credit Act by FSMA and the Regulated Activities Order.  Only in circumstances whereby credit union lending involves a third party supplier such as under a Borrower-Lender-Supplier agreement or where credit unions are involved in ancillary credit services, such as debt adjustment, do credit unions currently fall under the FCA’s consumer credit remit. 

This exemption is accommodated by the Consumer Credit Directive and arises from the fact that credit unions are capped in the interest they can charge at a uniquely low level of 3% per calendar month or 42.6% APR.  Furthermore they generally seek to provide a source of credit in competiion with high cost alternatives as well as being limited in to whom they can lend by their common bond membership criteria. 

We respond simply to support the scope of the review in its focus on provisions pertaining to the lending process as defined by the Consumer Credit Act.  We believe that the scope of exemptions and what constitutes regulated activity should remain outside the bounds of this review as such matters should be determined by government and parliament. The credit union exemption provides for a proportionate and flexible regime which allows credit unions to provide lending services which might otherwise not be possible which is to the benefit of consumers and competition.

We would be happy to discuss this further should you wish to.    

The full PDF version of this response is available to download on the right-hand side