Changes to Credit Union Rules - 13 May 2005
[ Last Updated 7 December 2005 ]
Media Statement by Hon Pete Hodgson, Minister of Commerce
13 May 2005
Commerce Minister Peter Hodgson today announced proposed changes to the legislation governing friendly societies and credit unions.
A first set of changes comprise:
- Allowing credit unions to decide their own common bond;
- Allowing charities and incorporated societies to join credit unions;
- Allowing credit unions to determine their own minimum deposit levels;
- Remove the requirement to specify charges in credit unions' rules; and
- Allowing credit unions to extend new services to their members.
It is proposed that these changes, that have already been the subject of consultation with the sector, be made by way of legislation scheduled to be introduced later this year.
Further changes, which will be included in the review of non-bank financial products and providers also announced today, are likely to be in the areas of:
- Amendments to current restrictions to give credit unions more flexibility to borrow and to invest surplus funds, and allow them to hold land;
- Allowing credit unions to raise capital by issuing securities to members;
- Conferring legal status on credit unions; and
- Allowing credit unions to convert to limited liability companies.
"Credit unions and Friendly Societies play an important role in providing financial services to New Zealanders who do not have access to mainstream banking providers," says Pete Hodgson.
"The proposed changes, and those to be developed through the review, should give these institutions greater flexibility to grow and bolster their value to consumers and the wider market."
Christian Judge, press secretary, 04-471 9707 / 021-670 349
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Background
The Government has agreed to planned changes to the Friendly Societies and Credit Unions Act in two phases. In the first phase, officials will instruct Parliamentary Counsel Office to draft changes to the Act that were agreed by the government in September 2004. These proposed changes are to:
- allow each credit union to determine its own common bond as a basis of membership, provided that the Registrar is satisfied that the bond is an objectively verifiable characteristic and is specified in the credit union's rules;
- allow charities and incorporated societies affiliated with the common bond to become credit union members;
- allow each credit union to determine the minimum deposit holding of each member, while retaining the statutory limit of $10 as a default provision;
- remove the requirement to specify service charges in credit unions' rules, provided a mechanism for levying charges is spelt out in the rules; and
- allow credit union associations to extend new services to their member credit unions without Ministerial approval.
In the second phase, the following in principle changes to the Act are planned, subject to the outcome of the review of financial products and providers that is led by the Ministry of Economic Development:
- Trust Deeds: Amend the current statutory restrictions by giving credit unions more flexibility to borrow and invest surplus funds and permit them to hold land if their rules allow them to do so and if they amend their trust deeds accordingly;
- Capital Raising: Permit credit unions to raise capital by issuing securities to their members;
- Corporate Governance: Make explicit that members of the committee of management owe directors' duties;
- Legal Status: Confer legal status on credit unions so that they can have limited liability, own property, have perpetual succession and sue and be sued in their own name; and
- Conversion Mechanism: Provide a conversion mechanism that is modelled on the Building Societies Act to allow credit unions to convert to a limited liability company.
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