The main Act of Parliament which governs how credit unions operate is the Credit Unions Act 1979. This sets out the objects of a credit union: -

• The promotion of thrift among the members of the society by the accumulation of their savings;
• The creation of sources of credit for the benefit of the members of the society at a fair and reasonable rate of interest
• The use and control of the members' savings for their mutual benefit;
• The training and education of the members in the wise use of money and in the management of their financial affairs.

The Act states that credit unions must have their accounts audited annually by a qualified auditor and that they must be insured against fraud or theft.

Since July 2002, credit unions have been regulated by the Financial Services Authority, as are banks and building societies. The performance of each credit union is monitored by the Financial Services Authority and staff and volunteers involved in the running of the credit union must be approved by the FSA.

Membership of the Financial Services Compensation Scheme means that in the very unlikely event of a credit union failing, savers will be compensated. The FSCS will repay up to a total of £31,700 (100% of the first £2000 in savings and 90% of the next £33,000). These figures are the same for banks and building societies. Credit union members also have the option of complaining to the Financial Ombudsman Service, if they don't get satisfaction from their credit union's complaints procedure.