Friendly Societies and Credit Unions (Regulatory Improvements) Amendment Bill

I move, That the Friendly Societies and Credit Unions (Regulatory Improvements) Amendment Bill be now read a first time. I nominate the Finance and Expenditure Committee to consider the bill. This bill is about the credit union sector, which covers 13 credit unions and their 190,000 members. Credit unions play a vital part in the country’s financial system. Credit unions have become highly progressive in their development of innovative payment methods. This is despite operating within the confines of legislation that has not kept pace with developments in the financial services and payments industry within which they operate. This is an opportunity for a much-needed update to the legislation.

Credit unions touch as many as one in 20 Kiwis and for over 50 years have provided a full range of banking services to diverse and far-flung community groups and industrial organisations. As such, they play a significant part in the financial services market. Credit unions have access to the latest core banking services, including New Zealand’s largest ATM network, which has 900 ATMs across the country. Payment services include ATM switching management and MasterCard services, anti - money-laundering services, and insurance and payment infrastructure services.

The bill makes certain changes to the Friendly Societies and Credit Unions Act of 1982, which was enacted around the same time ATMs were first introduced to New Zealand, well before the days of internet and mobile banking. The bill aims to remove unnecessary operating and compliance costs, promote greater efficiency, innovation, and accountability, bring credit unions into alignment with other financial service providers, and maintain the element of mutuality and the requirement of a common bond between members. The bill also includes measures to reduce the minimum number of credit union members needed for an association.

The bill provides for credit unions to be bodies corporate, with what is commonly referred to as the powers of a natural person. However, it is important to note that credit unions will be bodies corporate under the Friendly Societies and Credit Unions Act; they will not become companies under the Companies Act of 1993. As a result, all of the following remain unchanged under the bill: the statutory objects of a credit union under the Friendly Societies and Credit Unions Act, the requirement of a common bond for membership, the “one member, one vote” provisions, and the prohibition on transfer of members’ shares to people who are not members.

The incorporation of credit unions as mutuals with full capacity and powers in this bill is consistent with approaches worldwide. Australia, Canada, and the UK are already among those that have invested in this approach. It is also in line with the World Council of Credit Unions’ model law. As a matter of fact, the World Council of Credit Unions advised that it is not aware of any jurisdiction other than in New Zealand where a credit union is not considered a form of artificial legal entity. Article 3.10 of the model law states that licensing a credit union should render it “a body corporate with perpetual succession”. Article 3.10 goes on to state that credit unions should have a range of powers, including the power to “Exercise the powers, rights and privileges of a natural person as necessary.” None the less, treating credit unions as bodies corporate is also consistent with other mutuals in New Zealand such as building societies and cooperative companies.

So you can see why demutualisation of credit unions—that is, removing the mutuality requirements of credit unions—and allowing for outside shareholders cannot happen under the bill. Importantly, however, credit unions and their boards will still have to exercise those powers with reference to their objects, which remain unchanged under the bill. These include paying money into a fund to make loans to their members, the use and control of savings for their mutual benefit, and the training and education of members in the wise use of money, and in the management of their financial affairs. Credit unions and their boards will remain subject to the controls on them, such as legal and regulatory requirements under the Reserve Bank, financial markets, financial reporting, and taxation legislation.

The bill provides for a statutory transition process for credit unions from being unincorporated associations to bodies corporate in order to minimise compliance and transactional issues and costs. There will be two phases, with the first being a period of up to 18 months for the substantive provisions to come into force. Consequential changes will be required to the rules, trust deeds, and product disclosure documents. The second phase will be a further period of 6 months for the application of credit unions for incorporation. However, credit unions as bodies corporate will no longer need internal trustees to hold and deal with property or incur liabilities. All of these changes are intended to be neutral from a substantive, regulatory, tax, and financial reporting perspective.

In regard to lending, the bill enables credit unions to directly lend to small and medium sized enterprises (SME) that are related to that credit union’s members. These provisions are empowering rather than mandatory. This means that credit unions are not required to lend to SMEs.

The other important provisions relate to associations of credit unions under the Friendly Societies and Credit Unions Act. There is currently one association, the New Zealand Association of Credit Unions, trading as Co-op Money NZ. Co-op Money NZ is a cooperative owned by 11 of the 13 active credit unions in New Zealand. It provides its member credit unions with a number of banking, payment, and related services such as ATM services, EFTPOS and debit card services, internet and mobile banking, and anti - money-laundering services. This bill is intended to remove any uncertainty in the current Act and confirm that associations of credit unions have the flexibility to provide services to other parties where doing so is for the benefit of their credit union’s members.

So, should this bill pass, there will be a statutory transition process for credit unions from being unincorporated associations to bodies corporate in order to minimise compliance and transitional issues and costs. The operational date for the new entity in practical terms is generally the start of the financial year after the certificate of incorporation is issued. The detailed provisions of the bill are currently being studied by credit unions, Co-op Money NZ, and other interested parties, including the regulators.

The provisions of the bill have been subject to extensive work. This work includes work by the Ministry of Business, Innovation and Employment at the time of the earlier exposure draft, and I am informed that provisions have widespread support in the credit union sector. I am also aware that some credit unions do not support the provisions. I look forward to those matters, together with any other issues arising in the bill, being considered by the select committee.

This is an important bill for the credit union sector and for the customer-owned banking sector—[Interruption]

The ASSISTANT SPEAKER (Hon Trevor Mallard): Sorry, I apologise for interrupting the member. I have now had, I think three times, from Aupito William Sio, interjections attempting to direct me on matters that are solely my preserve. I do suggest that the member has a look at the relevant Speakers’ rulings, which do allow for more reading when a member has less experience or has a technical matter, and I think both of these would apply in this case.

The latter, certainly. Thank you, Mr Assistant Speaker. This is an important bill for the credit union sector and for the customer-owned banking sector of New Zealand, but, most importantly, it will help ordinary New Zealanders who borrow from credit unions, especially those starting out. I feel privileged to have the opportunity to modernise legislation that will bring immediate benefits to New Zealand. As such, I am very pleased to move this bill through the first reading. Thank you.

I raise a point of order, Mr Speaker. I would ask you to please reflect on the ruling you gave to Mr William Sio, and reflect on a ruling you made earlier to a New Zealand First member who introduced a bill in this House some weeks ago. You courteously allowed him to finish his contribution, and I acknowledge you for that, but—and I appreciate it is a matter of degree—in no way did he read his speech to anywhere near the same extent as that member, Stuart Smith, has done in this House this afternoon. I ask you simply to reflect on that.

Well—[Interruption] No, I am not going to take any further comment. If the member looks very carefully at the Speakers’ rulings, he will see that this matter is a matter entirely for the Speaker. I will give the member an explanation to say that my opinion, and the reason for my judgment, was—given the members have, I think, about equal experience—that this matter is a more technical matter, and there were some things that it was important to get on the record of the House. That is why I exercised my judgment that way. I think that if the member feels that his party has been picked on in this matter, he should talk to my colleagues.

Mr Assistant Speaker, you will note that I did not interject in any way, shape, or form, because I might have to engage in some of the same activity. We are supporting the Friendly Societies and Credit Unions (Regulatory Improvements) Amendment Bill. The bill is not quite as boring as that last speaker, Stuart Smith, made it out to be. In fact, when he said, at the very end, “I am very pleased to introduce this bill to the House.”, you would not have believed it, would you? You would not have believed it.

I understand Mr Tabuteau’s frustration here, because if you are reading something, at least put a little bit of energy into it, especially when it is the member’s own bill. It is his only member’s bill. So get out there, go hard for the credit unions, stand up for what you believe in—a bit of passion. Read it as if you mean it.

But, anyway, what I want to say is that there is a credit union in Hawke’s Bay. It is called NZCU Baywide. It does a fantastic job for members and for people of the bay. It is a different type of organisation from a bank, and it plays a very important role. The legislation that governs NZCU Baywide is 35 years old now, and the world has changed significantly since 1982. I think you were in the House, Mr Assistant Speaker, or no, you—anyway, the world has changed—

The ASSISTANT SPEAKER (Hon Trevor Mallard): Well, if the member continues that, he will not be.

Sorry. I think it is up to Parliament to bring this piece of legislation up to the 21st century standard, because there is no doubt we are demanding a much higher level of accountability from our financial institutions, but we also want to level the playing field for them as well, so that citizens have true options about whether they go to credit unions, friendly societies, banks, or whatever in terms of borrowing, lending, etc., etc.

There is a process point that I would like to bring up before I continue. I am going to quote here what Stuart Smith, in an interview with Fairfax, actually said: “The proposed changes”—this is talking about this bill—“were originally part of the Regulatory Systems (Commercial Matters) Amendment Bill, however the decision was made to put them forward in a standalone bill.” The Regulatory Systems (Commercial Matters) Amendment Bill was a Government bill that had minimal changes and minimal deletions by the select committee and the Committee of the whole House. How or why a Minister would actually take these clauses, or this part of the bill, out of the original bill and give it to another member as a member’s bill is highly concerning.

There are two things that concern me. First of all, that is so not appropriate in any way, shape, or form. We know this. The second thing is that it just shows how serious the Government is about this bill itself, because when a member drafts a member’s bill and it goes into the ballot, the odds of it being drawn out are actually not that high. The member himself has alluded to this. I am not too sure how long the member has been in the House—this is your second term, is it not, Mr Smith? First term? Third term? Anyway, he has been in here long enough, and he is the first to admit that it is his first bill that has ever been—[Interruption]—first term—drawn out of the ballot. So the odds of it being drawn out are not that high. It just shows the level of respect or the level of urgency, or where this actually places in the Government’s work plan.

Now that it has been drawn out, you heard the member, it was almost as if—you know, some people get a bill drawn out of the ballot and they are ecstatic because it is something they are very passionate about. I mean, I had a bill drawn out about council amalgamation, and I can talk for an hour on that without notes, or probably longer—or probably longer. But it is often something that a member is very passionate about, and they take every opportunity to jump up. They use the media and they go hard on it. Then there are other times when a member’s bill gets drawn out—and this bill here is the classic case—where you can almost hear them say: “Oh, no, how did that happen?”. They get a speech and they have got to read it out, and there is about as much passion as a damp squib.

The thing is, I am aware that credit unions and friendly societies do welcome this piece of legislation, but I know that the question a number of people will be asking is what a credit union is and what a friendly society is. I mean, what are we actually doing with this bill and what sorts of organisations are we doing this to?

Well, just to help those watching, and members on the other side—because I doubt Alastair Scott knows what a credit union is—a credit union is a type of financial cooperative. They range in size from small, volunteer-only operations through to large entities with thousands of participants. Credit unions can be formed by large corporations, organisations, and other entities, usually for their employees and members. The basic model that a credit union uses is that members pool their money—technically, they are buying shares in the cooperative. That is what they are doing. They are, in essence, shareholders, but they pool their money in order to be able to provide loans or demand deposit accounts, etc., etc. I suppose the biggest difference between a bank and a credit union is that a bank functions to generate profits for its shareholders whereas a credit union operates as a not-for-profit organisation designed to serve its members, who are also de facto owners. That is the main difference between a credit union and a bank.

Now, what is a friendly society? To be honest—you know, I have sat on the Finance and Expenditure Committee for a long time. I think I am reasonably financially literate, and if someone said to me “What’s a friendly society?”—I actually did not know what the formal definition of a “friendly society” was. I thought it was the Labour Party, where we all get together because we are all friendly, unlike the National Party. But it is not. There actually is a definition.

A friendly society—and when I talk about this, people will know what I am talking about, actually—is sometimes called a mutual society or a benevolent society. What it is, actually, is “a mutual association for the purposes”—here we go—“of insurance, pensions, savings or cooperative banking. It is a mutual organisation or benefit society composed of a body of people who join together for a common financial or social purpose.” So it is a little bit like the Labour Party, I suppose. “Before modern insurance, and the welfare State, friendly societies provided financial and social services to individuals, often according to their religious, political, or trade affiliations.”

What has happened with the advent of the modern bank and the welfare system, for example, is that friendly societies have moved from being almost like bodies that represent trade unions, etc., into having a much wider scope. I suppose that is one of the reasons why we do need to amend the legislation, because the world has changed substantially and the role of friendly societies and credit unions has also changed.

The thing is, this party will join the Government in saying that we support every piece of legislation that looks to get rid of red tape or to remove unnecessary regulatory barriers, but we must also be aware that in this day and age, the ability to defraud or launder money, etc., is also heightened. In fact, in front of the Law and Order Committee at the moment is a bill that is phase two of the anti - money-laundering legislation. We also need to be aware that whilst credit unions play a very important part in the fabric of society—often a lot smaller than banks—they will also be covered, and are covered, I am pretty sure, by anti - money-laundering provisions.

The thing, I suppose—I am going to digress slightly here, just for about a minute and a half—that really concerns me when we look at the Police Estimates is the amount of money given to police to investigate fraud. What we heard in the select committee yesterday was that, in fact, about 90 percent of the fraud committed within banks is not taken to the Serious Fraud Office or is not reported. That is because often these institutions do not want it out there that their employees have committed fraudulent activity.

But, anyway, back to the bill, for another minute and a half. We do support this—with a passion. It is necessary. I look forward to this coming—I am assuming it is going to come to the Commerce Committee. I am unsure, but I assume it will, which is the reason that I am speaking on it.

I know the CEO of NZCU Baywide, and he is a very good man. I am looking forward to engaging with credit unions and friendly societies, just understanding the issues that they have and the opportunities they have, but also the opportunities that this bill is going to provide, which perhaps are not available to them at this point in time. I also want to know what sorts of systems they are going to put in place, because this will create extra risks. What this bill will do is ensure that credit unions and friendly societies can actually lend money wider or change their operations, but with any change in operations—certainly ones that are provided through the regulatory and legislative process—there must be systems in place to ensure that with any change those risks are mitigated. You can never eliminate risks, but they are certainly mitigated.

So there will be a cost to credit unions and friendly societies. I am keen to know what that cost is, and I suspect that might be one of the reasons there are some credit unions that do oppose this. But the bill will appear before the select committee, and I am looking forward to following this through to the next stage. We will support this, and it has been a pleasure to speak on it. Thank you very much.

The deep irony of hearing Mr Stuart Nash talk about the Labour Party as a friendly society is, I am sure, not lost on the House. Friendly societies are, I think it would be fair to say, slightly strange beasts within our financial framework and the regulation of clubs and societies. There are not many of them left—there are about 20—but those that are left have quite significant assets. Actually, in my part of the world, the Upper Hutt Cosmopolitan Club is a friendly society, interestingly enough. I think one in eight people who live in Upper Hutt is a member of the “cossie club”. I know Chris Hipkins, the shadow leader of the House, is a long-term member there. It plays a significant role in the Upper Hutt community. That, actually, is a friendly society.

I know from some of my dealings with the “cossie club” that the legislation that governs it is outdated, frankly. It is anachronistic, it is outmoded, and it needs reform. The issue that it has been dealing with is unrelated to the financial oversight that this bill deals with, but it is generally true to say of friendly societies generally. So this bill is, I think, a good step forward.

It seems to me that there are, basically, three types of members’ bills. There are the sorts of political bills that are, basically, put up and have no real prospect of passing. The title of the bill is often the hit that the member is trying to get. There are sort of conscience issues—your classic is marriage equality or something like euthanasia, and there is a bill on the ballot for that now, and we had marriage equality in the last Parliament.

Then there are what I would characterise as the dull but worthy members’ bills. I do not mean any disrespect to the member Stuart Smith, but they are the sorts of bills that are probably not going to encourage hundreds or thousands of submissions to a select committee; they are the types of bills that encourage learned submissions from people who know what they are talking about. I would put this bill in that category. It is a dull but worthy bill, and they make sometimes significant but important improvements to legislation that is important.

In giving the speech before, Mr Nash talked about how some of these provisions—and, I think, maybe all of these provisions—were part of a Government bill, one of the regulatory improvements bills. Mr Nash seemed to find it “highly concerning” that these measures did not go through as Government legislation. Well, I do not have a huge background in the history of that bill, or indeed of this bill, but I would venture to suggest to Mr Nash that the regulatory improvement bills that we pass in the House are generally for non-controversial tidy-ups of legislation or improvements to legislation—regulatory improvements; it is in the title—that are non-controversial and that everyone can agree on. Actually, in the case of this particular bill and these provisions, as the member who is in charge of the bill said in his first reading speech, there is not actually consensus about it even amongst the friendly societies and credit unions. There are people who are opposed to it, and I am sure that when the bill does go to the Finance and Expenditure Committee, those credit unions will turn up and say that, and they will say why. I am looking forward to hearing why that is.

Actually, it seems to me to be totally inappropriate for a bill like this to be part of a regulatory improvements bill, which is meant to be, as I say, for non-controversial, consensus improvements to legislation. It seems—

💬 Fletcher Tabuteau: It was in the bill.

It was in the bill. That is right, Mr Tabuteau, and I have just spent a minute explaining why it is now appropriate that it is not in the bill, because there does seem to me to be some controversy about the changes.

We have already heard from both members who have spoken so far that there are credit unions or friendly societies who are opposed to at least some of the changes. Actually, there is quite a degree of complexity to the legislation. For example, it allows credit unions to incorporate, which brings them into line with other financial institutions. We might want to have a look at that at the select committee. Another change, for example, is bringing down the number of credit unions required to form an association. The current legislation says that there have to be seven. Well, when you have got only 20 in the country, that makes life quite difficult. The bill brings it down to two. Well, we are going to want to test that in select committee, as to whether or not that is an appropriate number. Two is—I suppose you could call it an association. It is not one, but it is only one more than one, obviously, and so we will want to test that at select committee.

This is a good bill. It deserves to be on members’ day, and I look forward to examining it at the Finance and Expenditure Committee.

Tēnā koe, Mr Assistant Speaker. I rise to talk about the Friendly Societies and Credit Unions (Regulatory Improvements) Amendment Bill. It is being introduced by Stuart Smith, with great enthusiasm. I am also enthusiastic about this bill. The Green Party will support it. We think it is a good bill. We see it as providing a really necessary basis to help the credit unions and friendly societies get on to a level playing field. At the moment, under current legislation—the 1982 legislation—they are effectively discriminated against and made to jump through hoops that are unfair and make life difficult for them.

One big advantage is that this bill will reduce unnecessary operations and compliance costs. Secondly, it will enable the credit unions and the umbrella body, Co-op Money NZ, to operate with greater efficiency, to embody more innovation, and to have a greater degree of accountability. Thirdly, we see that, essentially, it aligns the credit union movement with other financial service providers. It really does make the rules common across the different providers. Finally, and I think quite importantly—and where the original controversy, I think, arose—is that it does maintain mutuality and the bonds between the mutual societies.

So we see these benefits as being important. Why is this important? Well, actually, this is a relatively large component of our financial sector. There are 194,000 members. They have got $1.7 billion of assets in 16 credit unions and mutual building societies, and they operate through 76 branches throughout New Zealand, from Whangarei to Invercargill. So we think they are an important part of the financial services landscape.

They are also part of a wider group of member-owned cooperatives. As well as the 16 credit unions, there are also three larger cooperative banks, and the customer-owned banking sector has 350,000 members, which is 8 percent of Kiwis. So this is not a small organisation. The leadership provided by the umbrella organisation, Co-op Money, actually puts it as New Zealand’s sixth-largest financial transactor in providing services to those members. They operate according to principles that I think we could recognise as being important: they have a democratic structure, they provide services and benefits to their members, they play a role in education in spreading the messages about thrift and savings, they encourage cooperation between their members, they build financial stability, and they promote a sense of social responsibility. So we think these are qualities that should be strongly encouraged.

The Green Party policy supports a more diverse financial sector, including New Zealand - owned banks—so far, we have got only one—credit unions, building societies, and other local financial institutions. This bill, and the credit union movement itself, will create an enabling environment for social responsibility that we think is an important part of a broader ethical money, ethical banking, and socially responsible investment movement.

If I might just say one final word about this bill, we support it also because this is a very different slice of our financial sector, and we have seen too much dirty money coming into New Zealand. We have seen money-laundering that is taking place here on a massive scale, we have seen tax havens promoted by this Government, and we have seen the kind of speculation, particularly in houses, that is not what we want to encourage. Instead, we applaud this bill and this sector. Thank you.

If I could, for a moment, reflect on this pin that I am wearing today. It commemorates the Battle of Messines. I have just returned from a Featherston war memorial. Many of the Kiwis who were at that battle came from there. They came from the Featherston army camp, walked over the hill, and ended up—700 of them—dying at Messines. So I would just like to make a note of that and acknowledge them, almost exactly 100 years ago to the hour. Thank you, Mr Assistant Speaker.

Let us go to the bill. This is a very good bill. It tidies up what is a piece of legislation that is 30-odd years old, and 30 years ago, when those first eftpos machines—I can recall walking down Lambton Quay and just wondering what this new invention was that had come about. That is when this original Act was put in place. So it really is time to change and update the terms of the Act.

This bill reflects a part of the banking scene in New Zealand, as mentioned by the previous speaker, Barry Coates. The sixth-largest financial transactor is what these credit unions represent. To give you some idea, within the banking sector there are 24 registered banks: 20 are foreign-owned, only one is Government-owned, one is community-owned, and two are cooperatively owned. Seven of those 24 banks are listed on the NZX. To Mr Coates’ point—there is no reason not to have any other New Zealand bank in New Zealand. It is for shareholders, Mr Coates, to initiate one themselves. There is no law to stop another 100 percent New Zealand - owned cooperative bank, credit union, or bank from being initiated in the environment. I would just like to point that out to Mr Coates.

This bill does not change the characteristic of a mutual body that is owned for the benefit of the membership, and, as mentioned earlier, it often reflects religious groups. In this instance, we are talking about a group or a customer base that supports by lending and borrowing amongst each other, but at the moment there are restrictions on the credit union sector. So, for example, there are issues around the governance. You have still got to have, at the moment, trustees in place. Obviously, individuals come and go. That is an inefficient governance arrangement compared with, say, a bank, which has a board of directors, a chief executive officer, and so on.

So this bill will tidy up and enable the society or the union to be incorporated—to have its own life, its own legal entity, a continuous life independent of who comes and goes on the board of directors. But it still maintains the characteristic of being mutual—that is, it does not require and does not allow for third-party capital to come in, as would be the case with a bank. So there are no third-party shareholders allowed into a credit union, and this bill does not change that.

The other important aspect is that it is not governed by the Companies Act, as I hinted at earlier. It is governed by the Friendly Societies and Credit Unions Act. Although there will be some banking regulations overriding and managing the credit unions, it is not going to be a bank and it will still maintain the characteristics of a credit union and the mutuality—if that is a word—

💬 Fletcher Tabuteau: It is a word. Well done!

Thank you, Mr Tabuteau. This bill does create some efficiencies. It tidies up what is an old Act. It creates a level playing field for those credit unions to grow, in fact—to become more efficient and to serve their members more effectively. That is why I am enthusiastic about supporting this bill. I look forward to the submissions that will inevitably come. I note also that there will be some objections. I accept that, but look forward to the debate in the select committee.

I would like to suggest that Mr Bishop was incorrect in his contribution to the House earlier. This is not a boring piece of legislation full of technicalities. Actually, this is an exciting opportunity for a group of friendly societies and credit unions representing more than 190,000 people—someone earlier alluded to the fact that this represents one in 20 people. I think over here we heard that almost one in 10 people in New Zealand will see the benefits of updating this archaic legislation. Despite the delivery from the sponsor of the bill, Stuart Smith, I think this is a reason for this House to celebrate an exciting and, yes, technical piece of legislation.

I had the pleasure of meeting quite a few of these member groups and discussing with them their concerns. They spoke to me about an antiquated piece of regulation that they have been trying to operate under for the last, what, 35 years—since 1982. They showed me their desire to move into modern times, and, actually, I must give credit to the sponsor. Despite his delivery, he was on the money. He alluded to what they were trying to do in terms of technology, ATMs, and electronic transfer systems. They are trying to get there, but they have had this cloak of legislation literally suffocating their efforts, I would suggest, and we now have this opportunity in the House to support innovation and modernisation.

In particular, from New Zealand First’s point of view, we celebrate the fact that this is real and genuine competition against the big four Aussie banks. We see this as Kiwi money being able, and enabled, to be put back into Kiwi business. I speak with specific reference to the ability for the credit unions to use their funds to invest in small to medium sized enterprises where the membership is related. That is to be hugely celebrated. New Zealand First would like to see this ability, this opportunity, taken by the horns by these unions. We hope that they would grow from being the sixth-largest banking organisation in New Zealand, if I can call them that—to grow, basically.

In my limited time left I would like, obviously, to criticise the Government because I do think it was completely inappropriate for the Government to take this out of the regulatory changes legislation and give it to a member. We have spoken about it earlier already. I think Mr Nash spoke to it. That is the reality of the situation. The fact that it was drawn out of the ballot in such a timely manner is bordering on miraculous. It is incredible. This was past due in being changed, and that mechanism by which the Government moved it to being a member’s bill speaks to the veracity of the contributions from that side of the House. The Government did not care. It did not want to know about it. To be quite honest, it was insulting to the cooperative money and friendly societies movement.

I just want to finish by suggesting that the competition that we hope will grow from and be fostered by these changes will be to New Zealand’s benefit, not just the friendly societies’. We see this as a great opportunity. We see this as an opportunity to level the playing field, as I have said before. The legislation seeks to, basically, do some very fundamental and simple things. I said I acknowledge the speaker Stuart Smith because I think that in his contribution to the House he was almost pre-empting some of the concerns from some of the associate society members. I congratulate him on that because I feel the same way. But I must conclude by saying to the Police and Families Credit Union, your concerns will be heard in a select committee, and we will endeavour to ensure that we understand what they are—if we can, we will absolutely support you in that. Thank you.

It is a pleasure to be talking to the Friendly Societies and Credit Unions (Regulatory Improvements) Amendment Bill. First of all, I just want to congratulate my colleague Stuart Smith on having the good fortune to have his bill drawn out of the lottery, as we all know, of members’ bills. But contrary to some of the aspersions, and particularly those made by the previous member, Fletcher Tabuteau, I think this is a good bill. It is absolutely a very good bill trying to help ordinary New Zealanders with their financial arrangements. I think Stuart Smith is a hard-working MP, who seized the opportunity to do a good thing for many people. As we have heard before, there are a lot of people who have money invested in credit unions. So this is a good bill because it modernises some very old legislation, as we have heard—from 1982. So it is timely that it is dealt with.

Why the change? Well, credit unions operate now in a very competitive market. We all know that. There are many different institutions operating, offering money and doing services for people. It is interesting that a number of the speakers have spoken about the credit union arrangements at the moment. There are three that have fewer than 2,000 members, but there is one that has 68,000 members, and combined they have nearly $800 million worth of assets or loans. So, in terms of these businesses, they are large financial institutions.

What is a credit union? I heard Mr Stuart Nash try to explain it. Basically, these credit unions have the power to take money for the purposes of lending. They also can use it to control and apply savings and look after savings. But the third thing—one of the primary interests or purposes of credit unions—is actually about training and educating their members on the wise use of money. It is very unusual. I do not hear of banks having those sorts of things in their purposes statements. The fourth one is, obviously, to be able to operate.

I think that what this bill sets about doing—it has got some key elements. The first one is the difficulty around the structure of a credit union. What this bill does is it deals with the issue of allowing them to incorporate under the Friendly Societies and Credit Unions Act—not under the Companies Act, as many people assume, but under the Friendly Societies and Credit Unions Act. That Act gives it, effectively, the power of a natural person.

The second thing is that at the moment, credit unions have this perverse situation where they have all these members—thousands of members—whom they can lend money to, but they cannot lend money to their related small-business interests, for instance, if they own a company. What this bill does away with is it removes that perversity and allows the credit unions to lend directly to small businesses. Many people who are members of these financial institutions do want to borrow money to support those businesses, and also to place money that the company may have generated into a financial institution that is safe.

The other part about this bill is it deals with the issue around structure. Some of the speakers have talked about it. It is a very unusual structure that credit unions have to adopt, such as they will have, effectively, a board of directors, which you might envisage with an ordinary company. But, underneath it, they have to have trustees to hold assets such as property and another trustee to actually be able to operate the credit union. This is a weird structure that is very old and outdated. What this bill does is deal with those structural issues and, effectively, remove that added level of bureaucracy to enable credit unions to work and to operate much more effectively, thereby reducing costs but, just as importantly, reducing the complexity of the way they have to operate.

Finally, the bill deals with the impracticality of 13 unions having to have a requirement of seven of them to be a member of the Association of Credit Unions. Most people do not understand what a credit union is. The Association of Credit Unions—what that does is provide services like ATMs, eftpos services, debit cards, and mobile banking services. That is an important function, and this bill deals with it comprehensively. I fully support it.

I do not think there is any doubt that the framework that underpins credit unions and friendly societies is out of date and needs a good look taken at it. I do not think there is any doubt that the Labour Party supports the removal of unnecessary regulatory burdens—red tape, that sort of thing. The member Stuart Nash has covered that ground. What we do have a problem with, though, is when a 35-page bill is presented to this House in the name of a member who gets up and gives a technical written speech on it, when it is actually presented to the House as a member’s bill and when it is actually acknowledged that it was meant to be in a previous piece of legislation called the Regulatory Systems (Commercial Matters) Amendment Bill, which has gone before select committee and has been through all stages in the House. That bill was one of three omnibus amendment bills that all went through their stages, yet this part of it was somehow left out. We do not know why, and clearly that will be a question for the select committee.

I am a bit sad that the bill is not going to the Commerce Committee, for two reasons. The first is that there are no bills before the Commerce Committee at the moment and it could do with a bit of work being done from a Government that clearly does not have any legislation in that area. The second reason is that it should have been a part of the Regulatory Systems (Commercial Matters) Amendment Bill, which went through all its stages in the Commerce Committee. It could have been already dealt with, so it is wasting the time of the House for the bill to be considered as a member’s bill. It has already been drafted. It has clearly had input from officials. In fact, a good question to ask the member Stuart Smith is who actually wrote his speech, because I am sure he did not write it. I am sure it has come from officials. It was not part of the original bill that went to first reading, and I know this because I checked the initial report to the Commerce Committee, the second departmental report, and the third departmental report.

Although I can find a reference in subpart 9 in Part 1 of the Regulatory Systems (Commercial Matters) Amendment Bill to the Friendly Societies and Credit Unions Act 1982, where there were two proposed changes—actually, there were three proposed changes, I beg your pardon. There were minor changes to that Act. Why was this bill not considered to be a part of that legislation then? Those are questions that need to be asked at select committee, and I am, in fact, keen to sub on to the Finance and Expenditure Committee, if I can, to ask some of those questions. I think they are really valid questions that should be asked as to what the genesis of this bill was and how it has got to this point.

The three matters that it is concerned with—the inability of credit unions to incorporate, their inability to lend to small to medium sized enterprises that are related to members, and the reduction in the number of credit union members needed to form an association—all on the face of it look quite sensible and valid. But we have heard this before in first readings from this Government, when on the face of it the legislation looks quite straightforward, but there is an underlying reason for a delay and for opposition or for concern about the way it has been written. I hope that is not the case with this bill.

I think it is also timely to have a good look at credit unions and friendly societies and their structures, and how fit for purpose they are in this modern age. They have an underlying reason, as good societies rather than moneymaking, profit-making entities, but there are lots of questions to be asked at select committee about this bill.

I am thrilled to take a call on the Friendly Societies and Credit Unions (Regulatory Improvements) Amendment Bill in its first reading. I cannot imagine what could fire the passions more than taking care of a bit of regulatory streamlining or throwing away a few archaic regulations. It is difficult to contain oneself. How could anyone call this a dull and technical bill? This is the sort of thing that really inspires you to come to the House and let loose.

Before moving on to the substance of the bill, I would just note that Mr Nash in his call postulated that perhaps a friendly society could be seen in the Labour caucus. Well, I have to say that the rumours and leaks coming out of that caucus about the blood on the floor as it was debating whether or not to support the Family Incomes Package in the Budget show it is anything but a friendly group of people. What are you doing with your hands, Mr Faafoi—are we dancing?

💬 Kris Faafoi: Get back to the bill.

The purpose of the actions and initiatives under this bill is to change some regulation around credit unions to make them more competitive and less expensive to run in the modern financial services industry. Over the last few years, both before the global financial crisis and, certainly, following it, a number of regulatory frameworks and rules have been put in place to provide some safeguards for people in their dealings with financial services companies. The credit unions will still be covered by all of those, but this bill will get rid of some of the complicated and difficult wording around the statutory objects of association that credit unions have to follow but other financial services institutions do not. For instance, it will reduce the number of union members required for an association of credit unions down from seven to two. That will make it easier for credit unions to maintain their operations and to continue serving their members.

Under the current Act credit unions have a very complex supervisory and oversight regime. Among other things, they have to have internal trustees—as one of my colleagues pointed out, not only a set of trustees to manage their financial assets but actually a separate trustee to take care of the operations of the union.

Another really odd piece—because, you know, credit unions are not-for-profit organisations, but are there for the benefit of their members. The customers are effectively owners and members of the credit union. There is this odd situation where a credit union is not permitted to lend directly to a business such as a small to medium sized enterprise (SME) that has a relationship to one of the members of that credit union. They get around this, or have got around this to date, by instead making the loan to the member of the credit union, who then has a second loan with that SME with which they have some relationship. Meanwhile, the credit union does hold collateral against both its own member and the SME that ultimately is, in effect, the recipient of the loan. That just seems absolutely bizarre, particularly when it is not a requirement that is imposed on other major trading banks.

So the measures that Mr Smith’s very good bill—and he is a very good member for Kaikōura, by the way—will put in place will actually serve to help credit unions to maintain a competitive position in what is a regulated but still very competitive marketplace. They are a significant contributor to our financial services industry. About 194,000 people are members of credit unions in New Zealand. They collectively hold assets of around $1.7 billion and are actually the sixth-largest financial transactor by volume. That is pretty substantial, I think, by anyone’s measure. Given that they transact that volume of business and given that they exist for the benefit of their members and are a non-profit financial services option for people to choose, I actually think it is a very, very good idea that we make sure that the legislation that governs them is actually keeping step with modern times and modern markets. I commend this bill to the House.

The Green Party is supporting this bill. I am a huge fan of credit unions. My grandfather was a member of a credit union. I have been a member of a credit union. They demonstrate just what can be achieved by a financial institution that is member-owned and democratically controlled, and, frankly, I think we need a lot more of that. Many people do not even realise that credit unions are an option for them, and this legislation will go some way to allowing credit unions to properly reach out to their potential members and let them know what financial services they can provide.

I congratulate the member Stuart Smith on bringing this bill before the House. It is wonderful that it was pulled from the ballot, but it is actually quite a travesty that it had to be brought in on a members’ day and not as part of the Government programme. I spoke to the credit unions and Co-op Money NZ some years ago, and they were asking for these changes. They were concerned, because they were talking with officials at the Ministry of Business, Innovation and Employment who had been looking at potential changes but had backed away from them.

I am glad that the member Stuart Smith did bring this before the House, but it should have been a priority for his Government. There is no reason why this should have to happen on a members’ day. It should have been a priority for the Government. I do not want to take up any more time on a members’ day, so I will sit down.

Thank you to the last member, Julie Anne Genter, for giving me an earlier start than planned. Thank you for that. Look, I would like to respond to a few things that have been said during this debate. This bill actually started life as a member’s bill. It ended up in the Regulatory Systems (Commercial Matters) Amendment Bill later on, and if members had taken the time to do the research they might have realised that, but anyway.

Peseta Sam Lotu-Iiga was the member who put this bill up first. It was decided then to put it in this regulatory systems amendment bill. For the benefit of members who do not seem to be aware of this, there is a convention in the House, among other things, that that type of bill is to be non-controversial. But it turned out there were two credit unions at least—it may well have been three at that time—that had objections to provisions in the bill. Some of them still do. I, like the member, do look forward to that being aired in front of the select committee. We will get the bottom of all of those issues at that time. I have spoken to those credit unions and I understand their issues with the bill. I do not agree with them, but I do understand them, and I welcome the opportunity—in fact, I took the bill out of the ballot until I had more information and then I put it back in so that I ensured I knew what I was talking about at the time. I respect their opinion; I just do not happen to agree with it. When it was taken out of that bill, I willingly picked it up.

It is something I really believe in. I think this bill is actually about the little guys. This is about people who are members of credit unions, and the provision to allow small and medium enterprises to borrow money from credit unions and allow credit unions to lend directly to them is actually really important. You can imagine someone who has a lawnmowing business, for instance, who is a member of a credit union and who is used to dealing with the credit union on a day-to-day basis. They will now be able to carry out their business banking with the credit unions.

There are lots of good reasons why you would want to do that, but one of them—which I am sure very few of us in the House realise at all—is that very shortly, Co-op Money will have its Oracle Flexcube installed and up and running. It will be the only financial institution in the country that will have a tier one, state-of-the-art banking platform to operate from—the only one in the country. All of the trading banks will not have that, but it does, so it is leading the banking sector.

I also go along with a lot of the sentiment of other speakers in the House around the fact that this is a smaller part of the banking sector and is less complicated. There are no financial engineered instruments that the credit unions use, unlike other banks, so it is a much simpler process. It is, essentially, money in and money out. You know what you are getting, and I think that is fantastic. In fact, if there was a bit more of that in New Zealand, I do not think that would be a bad thing at all.

It brings much-needed competition into the banking sector in New Zealand, and I would be hopeful that more New Zealanders would consider using the credit union sector as a very serious part of their banking operation. I think it is something like $800 million that the credit unions are lending out. It is not small beer at all, but it is something really well worth considering, I believe. I think the ability to take the trustees out of the system to make it a much less complex and less costly operation for credit unions to organise their internal structures is a really good thing, and it is much needed for the credit union sector.

I would like to finish by going back to the beginning. It seemed like a number of the speakers in the beginning were really barely veiling their envy at a complex bill that is actually making a real difference. It started life as a member’s bill, it is going through the House as a member’s bill, and I understand that when you have a one-page bill that you could drive a bus through, for us to have something that has got 35 pages of complex legislation, it is something those members grapple with. You know, one day, in perhaps 20 years, if they ever have the opportunity of being in Government, they will realise that what is actually needed is well-drafted legislation. Thank you.

Bill read a first time.

Bill referred to the Finance and Expenditure Committee.