How credit unions are supervised and protected

Yes, credit unions are regulated. Every credit union operating in Great Britain and Northern Ireland is authorised by the Bank of England's Prudential Regulation Authority (PRA) and regulated by the Financial Conduct Authority (FCA)¹. That is the same two-part system of supervision that applies to banks and building societies that take deposits, and it is what brings credit union members inside the protections described on this page, including Financial Services Compensation Scheme (FSCS) cover for savings up to £120,000 per eligible depositor².

The PRA is the part of the Bank of England that makes sure firms do business safely and reduces their chances of getting into financial difficulty³. The FCA regulates the conduct of financial services firms in the UK so that consumers get a fair deal. For a credit union, that means one regulator watches its financial strength and another watches how it treats its members.

Every credit union is authorised by the PRA and regulated by the FCA

Regulation of credit unions in Great Britain and Northern Ireland is undertaken by the Financial Conduct Authority and the Bank of England's Prudential Regulation Authority¹. This has not always been the case. Before 2013 the predecessor regulator, the Financial Services Authority, supervised credit unions, and before credit unions came within the FSCS in 2007 members had no statutory deposit protection at all⁶. The current arrangement puts credit unions inside the same regulatory perimeter as other deposit-takers.

The split of work between the two regulators matters to a member in two ways. First, the PRA's job of making firms do business safely is what stands behind the promise that a credit union will hold capital and manage risk prudently³. Second, the FCA's conduct role is what gives members somewhere to take a complaint: the Financial Ombudsman Service can look at complaints about regulated firms, and the FCA regulates financial services firms in the UK to ensure consumers get a fair deal⁷.

Mutual organisations in the United Kingdom that carry out financial services activities such as deposit-taking and making investments are regulated by the FCA and the Bank of England's PRA under the Financial Services and Markets Act 2000 and the Regulated Activities Order 2001⁸. Credit unions sit within that framework because taking deposits and making loans are regulated activities. The wider system is explained in who regulates what, and the FCA's consumer role in The Financial Conduct Authority.

What a credit union is and the law it runs under

A credit union is a not-for-profit financial provider that helps people access banking products like bank accounts, savings and loans⁹. It exists to benefit its members and the communities they live in rather than to make a profit for outside shareholders. In law, a credit union means a society registered as a credit union under the Industrial and Provident Societies Act 1965 or the Credit Unions (Northern Ireland) Order 1985¹⁰. That definition appears in the rules for regulated savings products, including the ISA regulations, which use the same wording¹¹.

The operating principles of credit unions are set down in law by the Credit Union Act 1979¹². Key legislation concerning the lawful operation and regulation of credit unions in Great Britain includes the Credit Unions Act 1979, the Co-operative and Community Benefit Societies Act 2014, the Financial Services and Markets Act 2000 and its Regulated Activities Order 2001, and the Financial Services and Markets Act 2023¹. In Northern Ireland the equivalent legislation is the Credit Unions (Northern Ireland) Order 1985, the Co-operative and Community Benefit Societies Act (Northern Ireland) 1969 and the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001¹.

Because a credit union is a mutual society rather than a company, its members are also its owners. This is the same "customer-owned" umbrella that mutual banks fall under, but a credit union is not a bank and cannot offer overdrafts, mortgages, electronic banking services and payment methods or business loans in the same way as a bank⁸. What a credit union can offer, and how that has changed, is covered in the next sections. The broader picture of mutual ownership is explained in banking licences and brands.

Who can join: more than 90% of people in Great Britain

Credit unions are founded on a common bond: members must share something, such as living in the same area, working for the same employer or belonging to the same association. Despite that requirement, coverage is wide. More than 90% of the British population can join a credit union because of where they live, and in Wales the figure is 100%⁵.

Membership has grown substantially. At 30 March 2012, credit unions in Great Britain were providing financial services to 887,965 adult members⁵, and a report from the same period put the total at over 1 million people, including 121,000 juniors⁵. By 2025, official statistics show UK credit unions had 2.29 million members, an increase of 0.80% on the year before⁴. A 2012 inquiry report described credit unions as serving about 900,000 people¹², so membership has more than doubled since then.

Membership penetration varies widely across the nations. In 2009-10, 0.94% of the population of England were credit union members, a far lower proportion than in Wales and Northern Ireland¹³. Credit union use in Northern Ireland is well above that in Great Britain but below that south of the border¹⁴. For context on how widely credit is used generally, the FCA's Financial Lives survey found that 79% of UK adults (42.5 million) held one or more regulated credit agreements in May 2024, falling to 48% (25.9 million) if the 31% of adults whose only agreements were credit cards, store cards or similar are excluded¹⁵.

If you are wondering whether there is a credit union you could join, the credit unions guide explains how common bonds work and how to find one.

What credit unions are allowed to offer

The range of products a credit union may offer depends on where it is registered, and it has widened over time in Great Britain. From January 2012, the Legislative Reform (Industrial & Provident Societies and Credit Unions) Order allowed credit unions in Great Britain to offer a wider range of financial services, scale by having more members, charge more interest on loans, accept corporate members and invest surpluses in a wider range of products which may generate higher returns⁵. Relaxations of the legal restrictions have allowed unions in Great Britain to offer a wider range of financial services¹⁴.

The current position in Great Britain is that credit unions may offer current accounts, mortgages, insurance services and loans to other credit unions¹. In Northern Ireland the position is narrower, which is covered in a later section. In practice, many credit unions offer a smaller range than the law allows, so what a particular credit union offers is a question for its own product list. MoneyHelper notes that credit unions help people access banking products like bank accounts, savings and loans⁹.

There are limits on lending as well as on products. Credit unions are limited by law in how much interest they can charge¹⁶, and the Welsh Government's guidance states that credit unions will only lend what you can afford¹⁷. The FCA has also indicated that consumers wishing to avoid using high-cost credit might consider joining a credit union, which is limited by law in how much interest it can charge¹⁶. Credit unions are exempt from certain rules and regulations that apply to other financial services providers, which is explained under what regulation does not cover below¹⁸.

Reform of what credit unions may offer is still on the agenda. The Woolard Review recommended that the FCA should work with the Bank of England, the Treasury and the Northern Irish government to set the timetable on updating the Credit Unions Act 1979 to allow credit unions to expand their product offering¹⁹. Until the Act is updated, the product limits in the table above are what the law allows.

The cap on credit union loan interest: 3% a month

The maximum interest a credit union may charge on loans is 3% per month¹. Schedule 14 of the Financial Services and Markets Act 2023 also caps the interest that a credit union can charge on hire purchase agreements and conditional sale agreements at 3% per month¹. The cap is a legal maximum, not a target: individual credit unions set their own rates below it, and rates vary between credit unions and between loan sizes.

The cap has a legislative history worth knowing, because older documents quote different figures. 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 order²⁰. Before 6 April 2006, credit unions might not charge interest on loans exceeding 1% per month, inclusive of all administrative costs and other expenses²¹. The Credit Unions (Maximum Interest Rate on Loans) Order 2013 then increased the maximum from 2% per month to 3% per month²², with the new rate of three per cent per month applying from 1 April 2014²³.

What the cap means in practice is that a credit union loan cannot carry the very high rates associated with some other forms of credit, and the cap is inclusive rather than a hook for extra charges. The Welsh Government's guidance is that credit unions will only lend what you can afford¹⁷, and affordability is the standard the FCA applies to regulated lending generally. If a loan from any lender turns out to be unaffordable, the Financial Ombudsman Service can consider complaints about unaffordable lending¹⁸. The rules on high-cost credit more widely are explained in the high-cost credit review.

FSCS protection for your credit union savings

Savings in a credit union are protected by the Financial Services Compensation Scheme. FSCS protects your money up to £120,000 for all banks, building societies and credit unions that are authorised by the PRA and FCA²⁴. That is the same limit, worked out the same way, as for a bank or building society account: £120,000 per eligible depositor, per firm.

A quick and easy way of finding out whether a PRA-authorised bank, building society or credit union is protected by FSCS is to look for the FSCS Protected badge²⁴. The Welsh Government confirms that credit union loans and savings are protected by the Financial Services Compensation Scheme²⁵. This protection is relatively recent in the history of credit unions: in 2007, credit unions gained access to the FSCS, providing members with deposit protection for the first time⁶.

Two boundaries of the protection are worth knowing. First, the £120,000 limit applies per authorised firm, so savings spread across credit unions that share one authorisation count together, in the same way as brands that share a banking licence; that is explained in banking licences and brands. Second, not everything sold near a credit union is a deposit: FSCS states that savings products structured as long-term contracts of insurance issued by regulated mutual insurers may be protected under insurance protection rather than deposits protection². If a product is not on the FSCS's list, FSCS guidance on what to do when you cannot find a product or firm sets out how to check². The comparison of the two main routes for a complaint, FSCS and the Financial Ombudsman, is set out in FSCS or Financial Ombudsman.

What regulation does not cover: the Bank of England's role and its limits

The Bank of England's Prudential Regulation Authority authorises and supervises credit unions for safety and soundness³, but the Bank's role stops there, and some rules that apply to banks do not apply to credit unions at all.

The clearest example is payments regulation. The Payment Services Regulations 2017 state that the Regulations do not apply to credit unions, municipal banks and the National Savings Bank²⁶. The same exclusion appears in the body of the Regulations and in earlier payment services legislation, which excludes a credit union within the meaning of the Credit Unions Act 1979 or the Credit Unions (Northern Ireland) Order 1985 from the definition of a payment service provider²⁷. In practice this means credit unions provide account services under their own permissions and the credit union framework rather than as regulated payment institutions.

Consumer credit rules also bite differently. The FCA's Consumer Credit sourcebook (CONC) does not apply to most of the loans credit unions provide, and credit unions are exempt from certain rules and regulations that apply to other financial services providers¹⁸. That exemption is one reason the 3% statutory cap matters: it is the law, rather than FCA price rules, that limits what a credit union may charge. The FCA Handbook and its sourcebooks are explained in the FCA Handbook guide.

The Bank of England itself does not deal with members of the public about their savings. Asked whether it regulates the mortgage market, the Bank's answer is "no, but we do regulate banks"²⁹. The Bank states it will never contact people from personal email addresses, will never contact people about unclaimed estates, refunds, fines or warrants, does not offer savings accounts, investments, cryptoassets or guaranteed returns, and does not provide investment advice or endorsements³⁰. The Bank of England and its staff do not endorse, promote or advertise financial products³⁰.

How credit unions differ in Northern Ireland and the Republic of Ireland

Regulation of credit unions in Northern Ireland, like that in Great Britain, is undertaken by the FCA and the PRA¹. So the supervisory answer is the same on both sides of the Irish Sea. What differs is the law the credit unions run under and what they may offer.

Credit union law is largely devolved in Northern Ireland¹⁴. Many of the legal restrictions which have been relaxed for credit unions in Great Britain over the past twenty years have not been relaxed in Northern Ireland¹⁴. The result is the narrower product range shown in the table earlier: Northern Ireland credit unions cannot offer current accounts, mortgages or insurance, and are prohibited from providing services such as hire purchase agreements, conditional sale agreements, insurance and loans to other credit unions¹.

South of the border, registration and regulation of credit unions is undertaken by the Central Bank¹, not the FCA or PRA. The legal basis is different too: the Credit Union Act 1997 as amended, the Credit Union (Amendment) Act 2023 and the Credit Union Act 1997 (Regulatory Requirements) Regulations 2016¹. In November 2024, the Credit Union Act 1997 (Regulatory Requirements) (Amendment) (No. 2) Regulations 2024 exempted further services, including current account services, a broader range of insurance intermediation services, investment intermediation services and mortgage intermediation type services¹. Usage also differs: credit union use in Northern Ireland is well above that in Great Britain but below that south of the border¹⁴.

For a member, the practical points are these. A credit union in Northern Ireland is regulated in the same way as one in Great Britain, so FSCS protection and the FCA's conduct rules apply. But it cannot offer the wider products a Great Britain credit union may offer, and the 2012 legislative reform that widened services in Great Britain does not apply there. How money rules differ across the nations generally is covered in Money in Scotland, Wales and Northern Ireland.

How to check a credit union is genuine and spot scams

Because credit unions are regulated firms, checking one is straightforward: use the regulator's own register. nidirect's guidance on protecting yourself from scams is direct: if you are unsure about a financial services company, check the Financial Conduct Authority register of regulated companies, and if they are not on it, do not have anything to do with them³¹.

The steps in that diagram come from official guidance. MoneyHelper's advice on loan fee fraud is to check you are using a legitimate loan provider by searching the FCA Firm Checker and using the contact details listed there, not the ones given to you³³. The Financial Ombudsman Service likewise advises using the FCA's Firm Checker to confirm a firm is authorised and help avoid scams³². The same principle applies to anyone acting as a broker: make sure the broker you use is on the FCA's Financial Services Register, which means they are authorised and regulated by the FCA³⁴.

Scammers also impersonate regulators. The Bank of England publishes its own guidance on scams and fraud because fraudsters use its name: it will never contact people from personal email addresses or about unclaimed estates, refunds, fines or warrants, and it does not offer savings accounts, investments, cryptoassets or guaranteed returns³⁰. An approach offering a guaranteed return "from the Bank of England" is a signature of a scam, not a genuine product.

If something has already gone wrong, the routes for help are these. Complaints about a regulated credit union go first to the credit union and then to the Financial Ombudsman Service, which can consider complaints about banking and payments³² and about unaffordable lending¹⁸. MoneyHelper sets out the common types of scam and what to do about them³³. The wider picture is in scams and fraud and consumer protection.