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Lotteries

Why do you need to know?

Credit unions do not have the power to run lotteries, if you run a lottery through your credit union you do not comply with the current legislation. You can still benefit from lottery funds if they come from a third party and are used for educational purposes.

The Key Points

• Credit unions do not have the power to run lotteries due to their objects as set out in section 1(3) of the Credit Unions Act 1979. Running lotteries is considered contrary to the objects of promoting thrift and training members in the wise use of their money.
• Lotteries currently run by credit unions do not comply with the private lottery requirements as set out in section 4 of the Lotteries and Amusements Act 1976 (the Lotteries Act). Section 4(3) is breached because the lottery proceeds are not used to pursue the stated objects of the credit union.
• Credit unions can receive the benefits from a lottery, provided the lottery is run by a separate legal entity.

Credit Unions and Lotteries in detail

Legal Position

The view of the regulator and our legal advisors is that credit unions do not have the power to run lotteries due to their objects as set out in section 1(3) Credit Union Act 1979.

Section 4(3)(a) of the Lotteries Act is breached because the lottery proceeds are not used to pursue the stated objects of the credit union.

Specifically, the running of lotteries is considered contrary to the objects of promoting thrift and training members in the wise use of money.

The regulator has never approved the conduct of credit union lotteries and is now looking closely at enforcing the legislation that has been in place for some time.

How Can Credit Unions Benefit from Lotteries?

The regulator has made it clear that there is nothing to prevent a credit union from receiving the benefits of a lottery, provided the lottery is run by a separate legal entity. The society running the lottery would decide to donate the proceeds to the credit union and would not be controlled by the credit union.

The type of lottery would be a Society Lottery, registered with the Local Authority, which would need a copy of the society’s constitution. The separate society running the lottery could be a “Friends of the XYZ Credit Union” as the FCA has indicated that they would be likely to approve the use of the term “credit union” for such organisations.

However, to comply with lotteries legislation, any donation to the credit union would have to be used for educational purposes e.g. staff training and not normal operating costs.

Running Society Lotteries

Society lotteries are controlled by the combined lotteries legislation, contained in the Lotteries and Amusements Act 1976 and the Lotteries Regulation 1993, both as amended.

As they would be run by separate societies and not by credit unions, ABCUL cannot advise on the specifics of setting up such a lottery.

Anyone considering establishing a society to run a lottery is advised to join the Lotteries Council and to take independent legal advice.

Status of Prize-Linked Savings

As you may be aware, a number of credit unions are involved in a trial of a Prize-Linked Savings with HM Treasury as a way of incentivising their members to save. These sorts of arrangements are permissible under the Credit Unions Act providing that the member is not paying to participate (e.g. by purchasing a ticket).

In the case of prize-linked savings, members are participating through saving through a certain account, however, prizes could also be won through other non-financial means of participation for example attending the Annual General Meeting.

Thursday 11 January 2024