Financial Services and Markets Act 2000 (Exemption) (Amendment No. 2) Order 2011

Baroness McIntosh of Hudnall Excerpts

Monday 17th October 2011 Grand Committee

[Lord Newby]

My Lords—

[The Deputy Chairman of Committees (Baroness McIntosh of Hudnall)]

My Lords, I believe that the Minister has not yet finished the speech he wishes to make in order to put the Motion. We must first put the Motion before it can be discussed, so we must wait until he is ready to say that he wishes to put it.

[Lord Sassoon]

My Lords, credit unions operate throughout the United Kingdom, providing savings and loans services, mostly in their local communities. Although the credit union sector in Great Britain is relatively small, it makes a large contribution to the financial inclusion agenda by operating in areas of poverty where local communities often lack access to affordable credit. In contrast, the credit union sector in Northern Ireland is extremely significant within the financial services landscape. Approximately 50 per cent of the adult population of Northern Ireland are members of their local credit union.

That is why, quite properly, the previous Government decided that that situation needed to be looked at and resolved. It was the belief of the previous Government, confirmed by the present Government, that credit unions in Northern Ireland should be brought under the Financial Services and Markets Act. That is for three main reasons.

The first is for reasons of financial stability. Given the significance of credit unions in Northern Ireland, the collapse of the sector would have a devastating impact on entire communities’ access to financial services and credit facilities.

Secondly, the order will ensure that the deposits of each Northern Ireland credit union member will be protected by the Financial Services Compensation Scheme, the FSCS. This will guarantee each deposit up to the £85,000 limit, in line with credit union members in Great Britain. The current legislation exempts these credit unions from this guarantee. As a result, there is a distortion in the level of consumer protection provided for credit unions across the United Kingdom. Removing the current exemption from the Financial Services and Markets Act will address this distortion and prevent members from relying on untested depositor protection schemes run by the various trade bodies across Northern Ireland and the Republic of Ireland. Those credit unions that are unaffiliated with one of those trade bodies currently have no depositor protection. That is wrong. Northern Irish credit union depositors should be put on the same footing as those elsewhere in the United Kingdom; and as with bank depositors.

Thirdly, by removing the exemption from the Financial Services and Markets Act, the members of each Northern Ireland credit union will have recourse to the Financial Ombudsman Service if they encounter any dispute with their credit union. Again, this is an aspect of consumer protection not currently afforded to members in Northern Ireland and is another positive aspect of the proposed legislative changes.