The Deputy Chairperson (Ms Forsythe): I welcome the following departmental witnesses from DFE: Colin Jack, director of the business and employment regulation division; Laurence Rogers, head of the better business branch; and Chris Denvir, credit union policy lead. I apologise that we kept you waiting for a bit.
I understand that the officials have to go at 12.00 noon, so I will hand over to you for some opening remarks. I ask Committee members to be concise when asking their questions.
Mr Colin Jack (Department for the Economy): Thank you, Deputy Chair and members, for the opportunity to brief the Committee on the Credit Unions (Amendment) Bill. We send our congratulations and best wishes to the Chair. I am glad to hear that he is taking some paternity leave under our employment law framework.
As you said, Deputy Chair, the Minister introduced the Bill in the Assembly on Monday, and the Second Stage debate is due to take place on 3 November. The Bill is a targeted modernisation of the Credit Unions (Northern Ireland) Order 1985, which is the principal legislation that governs the credit union sector here. The Bill responds to changes in financial practice, governance and member expectations while preserving the mutual, member-owned character of credit unions. The Bill removes legal barriers that have been identified by the credit union sector and provides new options in areas that include membership, collaboration, services and capital. Most of its provisions are enabling for the sector. It will be for each credit union to decide whether to use the new flexibilities, having regard to its registered rules, the needs of its members, its appetite for change and the applicable regulatory requirements.
Importantly, where the Bill creates a new power, credit unions must continue to comply with the applicable requirements of the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA), as well as their own registered rules. Taken together, the clauses in the Bill are intended to help the sector to remain sustainable and responsive to members, while protecting the characteristics that distinguish credit unions from other financial institutions.
I will provide a brief summary of the main provisions in the Bill. Where I leave out a clause, it is because the clause is technical or minor in nature.
Clause 2 raises the minimum age for full membership and specified governance roles from 16 to 18. Existing younger members and pending applications are protected, and saving arrangements for under-18s and minor accounts will continue.
Clause 3 allows credit unions, where their rules permit, to admit family members who live in different households. That route is capped at 5% to protect the credit union's common bonds. Existing memberships would remain valid if that cap is exceeded, but further admissions would be paused.
Clause 4 allows a member to be referred to another credit union for a specific service. Membership of the receiving credit union lasts only for that service, and a reasonable administration fee may be charged. That would apply in circumstances such as where the credit union of which the individual is a member perhaps does not offer or does not have the capacity to offer the service that they want to avail themselves of.
Clause 5 protects personal information by restricting the public inspection of registers of members and officers. Record-keeping duties and lawful access for regulators and authorised bodies remain.
Clause 6 automatically carries the transferring credit union's common bond into the receiving credit union after an approved transfer or merger. That protects continuity and avoids a separate rule change resolution while retaining regulatory oversight.
Clause 7 enables optional new activities, initially "conditional sale agreements", "hire purchase agreements" and "insurance distribution activities", although there is a power to add additional services that are identified as necessary in the future. The addition of any further activities will require Assembly scrutiny, and all regulated activity remains subject to the requirements of the FCA and the PRA.
Clause 8 allows credit unions to issue deferred shares as long-term, loss-absorbing capital that is not subject to the protections of the financial services compensation scheme. They are not ordinary savings. Repayment is restricted, and purchasers must be clearly informed of the risks.
Clause 9 gives a clear power to charge reasonable fees for ancillary services that are linked to deposits, loans, conditional sale agreements or hire purchase agreements. Charges must be transparent and comply with consumer and regulatory protections.
Clause 10 allows credit unions to share a financial interest in a loan, supporting larger lending and spreading exposure. Each participating credit union must assess the risk, act within the rules and meet regulatory and data protection requirements.
Clause 11 clarifies that credit unions may hold or dispose of land, including part of a property, but only for the purposes of their business. It validates legitimate past arrangements, but, importantly, it does not permit unrelated commercial property investment. Clause 12 allows up to 10% of surplus to support social, cultural or charitable purposes without first paying a dividend on all shares. The existing 10% surplus cap remains.
Clause 13 confirms that meetings of credit unions may be fully remote or hybrid, where the credit union's rules allow. Members must still be able to participate and vote freely.
Clause 15 clarifies how auditors are appointed, replaced or removed, including notice and representation rights. It supports independence and orderly audit handover and will commence once notice periods are set by regulations.
Clause 16 updates the framework for secondary legislation-making powers and sets the Assembly procedure for new powers, so it replaces a number of current order-making powers with regulation-making powers. This clause permits technical updates while retaining consultation and scrutiny where required.
Clause 17 brings into force all clauses except clause 15 on the day after Royal Assent. Clause 15 starts later, once the auditor notice period regulations are ready.
The schedule makes the detailed amendments needed for clause 7, covering conditional sale, hire purchase and insurance distribution. It has no separate policy, and regulatory permissions and consumer protections still apply.
That concludes my opening remarks. Laurence, Chris and I will be happy to answer any questions.
Mr Jack: The issue was raised by the credit union sector in discussions that we have had with it and as part of the consultation exercise. It is partly because of feedback that the credit unions received from parents who were concerned about savings that they had been putting aside for their children, perhaps from birth but certainly throughout their childhoods, becoming fully available to them at the age of 16 rather than 18. The money was saved with a view to their going to university or buying their first car, perhaps, and the parents were concerned about the children having access to the money early.
There are also administrative issues for credit unions that relate to the availability of forms of identification and so on for young people.
Mr Jack: We have not had many specific responses from 16- and 17-year-olds, but the change is consistent with other areas of financial services. For example, young people cannot take out a credit card or any sort of credit agreement until they are 18, but full credit union membership makes that a possibility for 16- to 18-year-olds.
Mr Jack: It reflects the community-based and small nature of credit unions by comparison with other financial institutions. Other financial institutions make current accounts available to young people from the age of 11, so there is a choice for young people who want full access to their money. When I previously made enquiries about putting into an account on behalf of my kids money that I wanted them to have when they were 18, I was told, "They would have full access to it now". It is about making sure that the right choice is available.