Mutuals

Mutuals are organisations that are owned by, and run for the benefit of, their current and future members.

In the UK, the mutual sector is highly diverse and includes organisations ranging from housing associations to employee owned businesses.

The Treasury also has particular responsibilities for financial mutuals, including building societies, mutual insurers, co-operatives and credit unions.

In the Coalition Agreement, the Government stated its desire to foster diversity in financial services, promote mutuals and create a more competitive banking industry.

The Treasury is developing policy and delivering legislative changes to help meet this aim.

Legislation governing mutuals dates back several decades and reform has been piecemeal since then. In 2007, the Treasury consulted on changes to mutuals legislation, to update and improve the governance of these societies and create a more level-playing field for co-operatives and credit unions to compete with other forms of corporate.

Legislative Reform Order and the Co-operative Act

This resulted in the ‘Co-operative and Community Benefit Societies and Credit Unions Act 2010’ and a ‘Legislative Reform Order for Industrial & Provident Societies and Credit Unions’.

The Legislative Reform Order is currently going through the Parliamentary process and the Co-operative Act will be commenced in due course.

The Treasury is also undertaking reforms to enable the greater of electronic communications by mutuals, and to bring Northern Ireland Credit Unions under FSA regulation.

On Tuesday 19 July 2011 the draft Legislative Reform (Industrial and Provident Societies and Credit Unions) Order 2011 was laid in Parliament for its final period of scrutiny.

Taken together, these changes will modernise the legislative and regulatory framework governing mutuals and contribute to the Government’s objectives set out in the Coalition Agreement.

Consultations

Credit union maximum interest rate cap

In December 2012 the Government published a consultation on raising the maximum interest rate cap for credit union loans. This consultation seeks views on the proposal to increase the maximum interest rate that credit unions can charge, from 2% per month to 3% per month.

Credit union maximum interest rate cap

Electronic communications in the mutuals sector

In December 2010, the Government launched a consultation proposing to amend legislation to facilitate the use of electronic communications (such as email and internet) by the mutual sector.

The consultation was open to all members of the public with an interest, particularly building societies; mutual sector (friendly societies; industrial and provident societies; and credit unions); and finally members of mutual societies.

The consultation closed in January 2011 and Statutory Instruments have now been made in Parliament. The Impact Assessment is available on the link below:

Electronic communications in the mutuals sector consultation (consultation document, Impact Assessment, Statutory Instruments and summary of responses)

Regulatory reform of credit unions in Northern Ireland

In March 2010 the Treasury also published a consultation regarding the transfer of Northern Ireland credit unions to FSA regulation.

Credit unions play a large role in Northern Ireland financial services.

The transfer will ensure deposits are covered by the Financial Services Compensation Scheme and members gain recourse to the Financial Ombudsman Service in the event of a dispute.

Proposals for a regulatory reform of credit unions in Northern Ireland consultation (consultation document and summary of responses)

In addition, on 31 August 2011 HM Treasury published a joint consultation with the FSA regarding the new regulatory regime in place for NI credit unions from 31 March 2012. This closed on 31 October 2011. Within the consultation HM Treasury consulted on four pieces of legislation following negative resolution. The consultation and response documents can be accessed via the FSA website using the links below: