History and the law are usually intrinsically linked since it is past human behaviour, activities and interaction which determine the guidance necessary from the law.
The credit union movement, for instance, is generally speaking the glorified descendent of the “meeting turn” or “sou-sou” where persons in the community pooled money as savings for various purposes where they would otherwise not have access to large sums of cash. With the growth of this movement, legislation became necessary to protect the rights of members and regulate an area ripe for financial abuse.
As opposed to commercial banks which have shareholders and are really not interested in the opinions of or the benefit to the consumer, credit unions are owned by the individual members who elect their own board of directors with each member having one vote.
The credit union should be operated solely on the principles of what is good for the social and economic betterment of the members, but with increased assets quite a few seem to have lost sight of this fact with interest rates and terms and conditions for loans and mortgages that border on the unfair, if not highly questionable.
The operation of credit unions in Barbados is governed by the Cooperative Societies Act, Chapter 378A and the regulatory or supervisory role rests with the Financial Services Commission. Section 4 of the act sets out the principles which determine whether an institution may qualify as a cooperative society.
Some of these principles are that no member has more than one vote; proxy voting is not allowed; business is conducted primarily for the benefit of its members; profit is used to develop business, provide services to members, pay dividends and for education or charitable purposes.
A cooperative society is by virtue of section 21 a body corporate (same as a company) and has all “the rights, powers and privileges of an individual” such as suing and being sued in its own name, entering into contracts and may even conduct business outside of the jurisdiction of Barbados.
The society must maintain at its registered office copies of the act and all corporate documents, minutes of meetings and resolutions of members, orders from the Registrar, a list of the names, addresses and occupations of all past and present directors and a members register. Such documentation must be made available to members for inspection during usual business hours and each member is entitled to 1 copy of the by-laws without charge.
Since members are the owners of the society, then the deposits of such members are usually recorded as shares as required by section 30 of the act and the number of shares which may be issued unless restricted by the by-laws of the society remain unlimited. Only another registered society may own more than one-fifth of the shares of a society, with the approval of the Registrar. Section 44 of the act allows the credit union or society to exercise a lien on the share of any member in relation to any debt owed by that member to the society. Generally the credit union places a hold on the member’s account in the case of a loan.
In the case of a mortgage where the property provides the security for the payment of the outstanding amount I can find no justification for placing a hold on the other liquid assets of the member for 25 to 30 years, especially in cases where mortgage insurance has also been made a requirement for the advance of the money.
The profit of the society from the immediately preceding financial year is divided up in accordance with section 34 between debt servicing, the reserve fund into which 25 per cent of the profit should be paid and dividends. The reserve fund must be invested and dividends cannot be paid where the society is or may become insolvent.
There are 271 provisions in the Act and we will continue the examination of the credit union/cooperative society landscape in the next instalment.