CREDS 7.1 Application, purpose and interpretation

1. (1)

   This chapter seeks to protect the interests of credit unions' members in respect of loans to members under section 11 of the Credit Unions Act 1979. Principle 4 requires credit unions to maintain adequate financial resources and CREDS 5 sets out the FSA's detailed capital adequacy requirements in respect of credit unions.

2. (2)

   This chapter is not relevant to loans between credit unions, except as indicated in CREDS 3.2.6 G (4).

The rules and guidance in this chapter are in addition to the provisions of section 11 of the Credit Unions Act 1979 in relation to loans made by credit unions. Under these provisions

1. (1)

   a credit union may make a loan only to:

   1. (a)

      a member of the credit union who is an individual; and

   2. (b)

      a corporate member of the credit union, if the credit union's rules provide that it may make loans to corporate members and making the loan would not result in the aggregate of the outstanding balances on loans made by the credit union to corporate members exceeding the percentage of the aggregate of the outstanding balances on all loans made by the credit union specified by or under section 11 of the Credit Unions Act 1979;

   3. (c)

      other credit unions;

2. (2)

   a credit union may not make a loan to a member of the credit union holding only deferred shares.

"Corporate member" has the same meaning as in section 5A of the Credit Unions Act 1979.