The Credit Unions Act 1979 and later reforms

Credit unions in Great Britain exist because of one short piece of law: the Credit Unions Act 1979. It is the Act that says what a credit union is, who it may accept as a member, how much people may save and borrow, and how much interest it may charge on a loan. Every credit union you might join in England, Scotland or Wales is registered under it, and the Treasury still uses powers in that Act to set the maximum interest rate a credit union can charge today¹.

The Act has been changed several times since 1979, most significantly by a Legislative Reform Order that took effect in January 2012, which widened who credit unions could admit and raised the membership limit³. The limit now stands at ten million people for a single credit union, up from three million, a ceiling so high that no British credit union approaches it: across the whole of the UK, adult membership reached 2.17 million in the first quarter of 2026, spread across hundreds of separate credit unions⁴.

For a member, the Act is not an abstract legal document. It is the reason a credit union can only accept people who share a connection with each other, the reason there is a cap on loan interest, and the reason your savings and loan sit inside a regulated, cooperative structure rather than a commercial one. This page explains what the Act does, what the reforms changed, and where the law may go next. How credit unions are supervised day to day is covered in our guide to financial regulation in the UK.

What the Credit Unions Act does for members

The Credit Unions Act 1979 is the founding law for credit unions in Great Britain. A briefing for the Northern Ireland Assembly lists it first among the key legislation for the lawful operation and regulation of credit unions in Great Britain, alongside the Co-operative and Community Benefit Societies Act 2014, the Financial Services and Markets Act 2000, the FSMA 2000 (Regulated Activities) Order 2001 and the Financial Services and Markets Act 2023¹. In other words, the Act defines what a credit union is, and the later financial services legislation brings those credit unions inside the system of regulation that governs banks and other lenders.

The Act did not create credit unions from nothing. The first credit union in the UK was founded by John Hume in Londonderry in 1960, and the first credit union in Britain began trading in 1964⁸. Those early credit unions operated for fifteen years before Parliament gave them a statutory framework. A Parliament inquiry in 2012 put it plainly:

That is the Act's core function from a member's point of view. It fixes in law the principles on which every credit union runs: members must share a common bond, the credit union is a cooperative owned by those members, and its lending and saving limits are set by statute rather than by commercial choice. A credit union is registered under the Industrial and Provident Societies Act 1965 by virtue of section 1 of the Credit Unions Act 1979, or in Northern Ireland under the Credit Unions (Northern Ireland) Order 1985¹⁰. Later legislation uses the same definition: when regulators need to say what counts as a credit union, they point to "a credit union within the meaning of the Credit Unions Act 1979 or the Credit Unions (Northern Ireland) Order 1985"¹⁰.

For someone saving or borrowing, this legal shape has practical consequences. Because a credit union is a mutual society registered under cooperative law rather than a company, its members are its owners, and the rules on what it may do with their money come from the Act and the regulators, not from shareholders. The Act also gives the Treasury specific powers over credit union lending, most importantly the power in section 11 to set the maximum interest rate a credit union may charge on a loan, which the Treasury still exercises by order⁷. The result is a sector where the basic protections are built into the legal definition of the institution itself.

Four core objectives set in law

The operating principles the Act sets down in law translate into a handful of rules that shape every credit union⁹. These are the objectives a credit union is legally constituted to pursue, and they explain why a credit union behaves differently from a commercial lender.

The first is thrift: credit unions exist to encourage saving among their members. The second is the common bond: the Act ties membership to a shared connection, so a credit union serves a defined community rather than the whole market⁶. The third is lending to members: a credit union may lend only to its own members, within limits the law sets on amounts and on interest. The fourth is the cooperative structure itself: surplus is returned to members rather than to outside shareholders, and each member has a vote regardless of how much they have saved.

These objectives are not aspirations. They are the conditions of registration, and a body that does not meet them is not a credit union in law. When the Treasury consulted on the maximum interest rate cap, it did so under the Act's own provisions, because the cap is part of how the balance between affordable lending and a sustainable credit union is struck¹¹. The Department for Work and Pensions, through its Credit Union Expansion Project, aimed for the sector to serve one million more people by 2019, an ambition built on the assumption that the cooperative model could scale without abandoning its principles¹¹.

Who can join: the common bond

The single rule that most shapes a person's experience of credit unions is the common bond. All credit unions in the UK may only accept members who have a "common bond"⁶. The House of Commons Library explains what that may be:

MoneyHelper describes the same range in slightly wider terms: members may share living, working, studying or volunteering in a certain area, working in the same industry or for certain employers, or belonging to the same trade union¹². The common bond is therefore not one rule but a family of possible connections, and each credit union chooses the one that defines it, within the law.

Coverage is broad. More than 90% of the British population can join a credit union because of where they live, and in Wales the figure is 100%³. That does not mean one credit union covers everyone: it means that for almost every address, at least one credit union's common bond includes the people who live there. Alongside the live-or-work-in-the-area bonds, there are credit unions for particular employers, industries and trade unions, so many people qualify through their job as well as their address⁶.

If you are weighing up whether a credit union suits you, the common bond is the first thing to check, and our guide to the common bond: who can join a credit union covers it in detail. To find credit unions whose bond covers you, use our credit union directory, and to confirm what information you need to join, you need to visit or call your chosen credit union².

Membership limit: from three million to ten million people

For most of the Act's life, credit unions were small by legal necessity. The original limits kept credit unions local, and the figures from the era show how local: a Welsh research study of Llandudno and District Credit Union recorded membership standing at 2,200 in 2009¹³. The sector as a whole was modest too. In 2012, credit unions in Great Britain were providing financial services to 887,965 adult members, and a Parliament inquiry the same year described a sector of approximately 400 credit unions serving about 900,000 people³.

Reform came in stages. From January 2012, the Legislative Reform (Industrial & Provident Societies and Credit Unions) Order allowed credit unions to define their common bond more flexibly and raised the ceiling on how many members a single credit union could have³. The membership limit now stands at ten million people, up from three million, a change designed to let large credit unions emerge and to let existing ones grow through mergers³.

The headroom is enormous compared with the sector's actual size. Bank of England statistics show UK credit union membership growing steadily but from a small base: 2.15 million members at the end of 2024, a peak of 1.73 million adult members back in the third quarter of 2017, 2.16 million in the third quarter of 2025, 2.29 million across 2025, and 2.17 million adult members in the first quarter of 2026, a 0.60% increase on the quarter⁴. For comparison, over 100 million people are credit union members in the United States²⁰. The ten million limit is therefore less a constraint than a signal: the law now permits credit unions big enough to serve a city, even though none has yet reached that scale.

For a member, the raised limit matters in two ways. It makes mergers between credit unions easier, because a combined credit union is far less likely to bump into the ceiling, and our page on what happens to your loan and savings in a merger explains what that involves. It also underpins the growth of credit unions offering current accounts and prepaid cards, since a bigger membership base makes it more viable to run the systems those services need.

What the reforms changed for students, local workers and relatives

The 2012 reforms changed the common bond as much as the membership cap. Before them, a credit union's bond was narrower, and the categories of who could join were tighter. After January 2012, credit unions could define their common bond to include people who study or volunteer in an area as well as those who live or work there, and to serve employees of organisations within their field of membership³.

Three groups gained most. Students became easier to include, because a credit union serving a town or county can now count people who study there, not only residents¹². Local workers gained a second route in: where a credit union's bond is based on an area, people who work there can join even if they live elsewhere, and where the bond is based on an employer or occupation, staff qualify through their job⁶. Relatives gained indirectly: with more freedom to define the bond, many credit unions now write it to include family members of existing members, a change our page on whether your family can join too covers.

The reforms also changed the money side. A 2006 order increased the limit on members' deposits from £5,000 to £10,000, and raised the limit on deposits from persons too young to be members from £5,000 to £10,000, unless the deposits are held in a Child Trust Fund, in which case the credit union may accept a larger deposit²¹. Before amendment, the maximum saving permitted in the rest of the UK was £5,000 or 1.5% of the total shareholding of a credit union, whichever was the greater, while in Great Britain the limit on members' shares was £10,000 or 1.5% of total shareholding, whichever is the greater⁸. Loans in Great Britain could be made up to a maximum of £15,000, compared with £5,000 in excess of share capital in the rest of the UK at the time⁸. These limits matter for anyone saving a substantial sum, and our guide to credit union savings accounts and limits sets out where they stand now.

Northern Ireland and the Republic of Ireland took different paths. In the Republic of Ireland, legislation grants full membership rights, excluding voting, to under 16s, and in November 2024 further regulations there exempted additional services from certain regulatory requirements, including current account services and a broader range of insurance intermediation services⁸. Northern Ireland's credit unions work under the Credit Unions (Northern Ireland) Order 1985 rather than the 1979 Act, so reforms made in Westminster for Great Britain do not automatically apply there¹.

Why the Act still matters when you save or borrow

The Act is not a historical curiosity: it governs the two things most members do, saving and borrowing, through limits that are still live law.

The clearest example is the interest cap. Section 11(7) of the Credit Unions Act 1979 gives the Treasury the power to set the maximum interest rate a credit union may charge on a loan by order⁷. The Treasury has used that power repeatedly: the Credit Unions (Maximum Interest Rate on Loans) Order 2006 was made under section 11(7), and the 2013 Order was made under section 11(5) and (7)²². The cap is the reason a credit union loan cannot become a high cost credit product in the way a payday loan can, and our page on the maximum interest a credit union can charge explains how it works and what it covers.

The Act also shapes how credit union loans are regulated alongside the Consumer Credit Act 1974. Most of the loans that credit unions provide are specifically exempt from the Financial Conduct Authority's Consumer Credit sourcebook (CONC)²⁴. A 2006 explanatory memorandum set out the breadth of this: credit unions are exempt from the Consumer Credit Act's agreement form and content rules, pre-contract information, advertising standards, information disclosure, the credit licence requirement, and default, termination and early settlement procedures, and it is not necessary for credit unions to hold a credit licence²¹. That exemption does not leave members unprotected: the FCA regulates credit unions directly, and the Financial Ombudsman Service can consider complaints about unaffordable lending, applying the same standards of affordability assessment it applies across credit²⁴.

Complaints themselves were brought inside the formal system in 2002. The procedures and time limits in the Financial Services Authority's complaint-handling rules applied to credit unions for the first time in October 2002¹⁴. Since then, a member with a complaint about their credit union has had access to the ombudsman in the same way as a bank customer, and our guide to consumer protection in UK financial services explains how to use it.

Finally, the Act's cooperative structure determines what happens to your money in the hardest cases. Because savings are shares in a mutual society, rules on nominating someone to receive your shares and on what happens when a member dies come from cooperative law rather than from a company's articles, and the free life savings insurance and loan protection many credit unions offer sit inside that same framework.

Calls to update the Act, and who sets the timetable

The 1979 Act is nearly fifty years old, and there are active calls to modernise it. The most significant came from the FCA's Woolard Review, published in February 2021, which recommended:

The direction of travel is towards letting credit unions offer more. In the Republic of Ireland, reforms have already exempted services including current account services, investment intermediation type services and mortgage intermediation type services from certain requirements¹. In Scotland, a Credit Union Working Group has detailed recommendations for credit unions, the Scottish Government, local authorities, schools and employers, and a Scottish Government report records that a consultation on reform of the Credit Unions sourcebook closed on 30 September 2015, with all the main credit union representatives in Scotland submitting responses²⁶.

Who actually changes the law? The Treasury holds the key powers: section 11(7) of the Act lets it set the maximum interest rate by order, and broader reform of the framework around credit, including the Consumer Credit Act 1974, is a Treasury responsibility exercised through Parliament⁷. The government consulted on reforming the Consumer Credit Act 1974, with responses invited by 17 March 2023, stating an intention that the reform will facilitate innovation in the credit sector and increase accessibility of credit products²⁸. The Consumer Credit Act itself is kept up to date on the legislation website with all changes known to be in force as of 28 September 2026³⁰.

The wider statutory landscape is also on the record. The Public Mutual Register lists the statutes under which mutual organisations are registered, including the Co-operative and Community Benefit Societies Act 2014 (previously the Industrial and Provident Societies Act 1965), the Credit Unions Act 1979 and the Credit Unions (Northern Ireland) Order 1985³¹. Any change to that landscape, whether to let credit unions offer new products or to simplify the rules they follow, would be made there, by the Treasury and Parliament, on a timetable that, for now, has not been set.