Restrictions removed for credit unions

Finance Minister Michael Cullen has announced changes to legislation to allow credit unions to grow, increase their membership and modernise.

Addressing the New Zealand Association of Credit Unions conference in Napier Dr Cullen said the Government would amend the Credit Unions and Friendly Societies Act 1982 to remove provisions that tie the hands of credit unions without good reason.

The changes will:

allow credit unions to extend their membership to charities and incorporated societies that meet the common bond requirements

remove existing restrictions on membership, provided that the rules of the credit union contain an objectively identifiable common bond

allow credit unions to provide new services without Ministerial approval, provided that the services are consistent with their own rules and with the Act

allow credit unions to determine a higher minimum deposit requirement than the present $10 limit, if they wish

permit credit unions to determine and specify in their rules their own processes for setting service fees.

The Government has also decided to allow credit unions to convert to alternative governance regimes, if they wish.

In addition, the Government will allow restrictions on borrowing, investment and capital reserves to be varied by credit unions – provided members are not exposed to unjustifiable risks.

“More work is needed on both these issues. Cabinet will consider detail in March 2005.”

Dr Cullen said “the changes, particularly those relating to the common bond requirement should lead to a significant growth in membership for credit unions.”

The further work will include a review of credit union governance provisions to ensure that there are adequate protections for credit union members – most of whom are low to middle income earners – alongside a more flexible environment in which credit unions can provide a better range of services.

“These changes are a major step towards finding a viable way forward that maintains the important features of the credit union movement into the twenty-first century”, Dr Cullen said.

The legislation amending the Act is expected to be introduced into Parliament during 2005.

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