Prudential Regulation Authority Rulebook

16.1

Credit unions providing credit cards, hire purchase, and/or conditional sale are required to meet the provisions in Rule 10.3 of the Credit Unions Part of the PRA Rulebook. The PRA also expects credit unions that provide credit card services to ensure:

• the board has sufficient knowledge and expertise regarding the risks involved; and
• a credit card policy is maintained which sets out (among other matters) how they would monitor and mitigate risks arising from the activity. This should include:
  • appropriate risk management arrangements, including monitoring metrics to provide effective oversight;
  • details of how the credit union is meeting its obligations with respect to outsourcing arrangements that apply to credit cards. For example, credit unions should be able to demonstrate that they are able to terminate outsourcing arrangements where necessary without detriment to the continuity of provision of services to members;¹⁵ and
  • an assessment of how much capital is required to cover specific risks related to credit cards (for example claims arising under section 75 of the Consumer Credit Act 1974, or losses from fraud, issues with the payment systems, product design, mis-selling, incorrect interest charges); this should be clearly documented. Where a credit union fails to demonstrate that they have enough capital to cover such risks, PRA supervisors may consider imposing an additional capital add-on (see section 2 above on capital).

16.2

Credit unions that provide credit cards or enter into hire purchase or conditional sale agreements are expected to meet the liquidity stress testing expectations set out in paragraphs 12.1 to 12.4.