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 second time.

This bill is about friendly societies and credit unions. A friendly society is formed to provide for the relief or maintenance of members and their families during sickness, old age, or in widowhood by voluntary subscription or the aid of—

ASSISTANT SPEAKER (Adrian Rurawhe): My apologies to the member. Sorry for interrupting, but it is time for me to leave the Chair for the dinner break.

Sitting suspended from 6 p.m. to 7.30 p.m.

As I was saying—maintenance of members and their families during sickness, old age, or in widowhood by voluntary subscription of their members or the aid of donations.

A credit union is a financial cooperative which encourages saving, thrift, and education to enhance the social and economic well-being of its members. Any surplus the credit union makes is reinvested for the benefit of its members. The credit union sector covers 13 credit unions and their 190,000 members, with assets of $1.7 billion and transactional values totalling nearly $10 billion. The sector plays 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 payment 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 60 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 their own ATMs; payment services, including domestic EFTPOS cards and MasterCard debit cards; 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, and was well before the days of internet and mobile banking. Most of these changes relate to credit unions, although the Finance and Expenditure Committee has also recommended one change to the Act to be made in relation to friendly societies. Credit unions have a very important social role as well in areas where traditional trading banks no longer want to operate, such as smaller communities.

The bill aims to remove unnecessary operating and compliance costs; promote greater efficiency, innovation, and accountability under the current Act; bring credit unions into alignment with other financial service providers; and maintain the element of mutuality, which can be defined as being owned and operated by the members for the benefit of the members, one vote per member, and the requirement of a common bond between members. The bill also includes measures to reduce the minimum number of credit unions needed for an association.

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. Co-op Money NZ enables credit unions to offer banking services similar to those offered by the traditional banks. In fact, Co-op Money NZ operates a tier one banking platform, and owns and operates the largest ATM switch in the country, with over 1,000 ATMs connected to the banking system through them.

Co-op Money NZ made a submission to the Finance and Expenditure Committee strongly supporting the bill, stating, “The changes set out in this Bill … are … very welcome, absolutely necessary and long overdue.” This bill is intended to remove any uncertainty in the current Act, and to confirm that associations of credit unions have the flexibility to provide services to other parties, where doing so is authorised by their rules.

At the select committee stage, the bill was examined by the Finance and Expenditure Committee. I would like to acknowledge their consideration. The committee heard 20 submissions from interested groups and individuals, and received advice from the Ministry of Business, Innovation and Employment. The committee has recommended the bill should be passed with amendments, and I would like to address some of those key changes now.

Allowing friendly societies to offer securities—a submission from the Manchester Unity Friendly Society sought to allow friendly society insurers to issue securities so that they could meet their minimum capital requirements under the Insurance (Prudential Supervision) Act of 2010. The select committee added new clause 9B, so that friendly societies can issue financial securities to raise money from their members, meaning that they can grow to meet the demand of their members.

The second area was around allowing members who have a small to medium sized enterprise to borrow directly for that enterprise from their credit union. Changes have been made throughout the select committee stage to allow small to medium sized enterprises related to a credit union member to operate more efficiently. An example could be either a lawnmowing company or a hairdressing company currently owned by a credit union member who operates such a business—they are not able to borrow money to utilise financial products and services in the name of their business. This can lead to members reluctantly leaving the credit unions for the trading banks. Credit unions can now provide other financial services, including credit cards, debit accounts, and trading accounts for a member’s small to medium sized enterprise.

Initially, the bill would have considered a member to be related to a body corporate when they had the power to exercise 25 percent or more of the voting products or shares, if you like, of the body corporate. It didn’t have a similar rule, however, for partnerships and trusts. So the select committee added new clause 25A to replace section 110 of the Friendly Societies and Credit Unions Act. New section 110(3)(b) provides that a firm under the Partnership Act can receive a loan if the member of the credit union was a partner of the firm and they had a 25 percent or more share of the voting products, or, (c) in the case of a trust, the member or a member of his or her family has a beneficial entitlement to 25 percent or more of the trust’s assets. The select committee has also recommended excluding limited partnerships registered under the Limited Partnerships Act from loans to enterprise provisions.

Mutuality was a concern of some submitters—that incorporating credit unions may compromise mutuality, and therefore lead to credit unions not acting for the benefit of their members. I would like to acknowledge the help of Dr Duncan Webb, who worked with me on a recommendation to officials for an amendment to allay the concerns of some submitters. The select committee has accommodated for this by amending clause 15 to insert new subsection (1AA) into section 101 of the principal Act, to state “A credit union is to operate, on the basis of this Act, for the mutual benefit and assistance of its members.”

High Court powers to make a restraining order—if a credit union is acting outside the Act, there is now an additional check, adding, in clause 24, new section 107F to the Act. This is a useful intervention, giving the High Court the power to make an order restraining a credit union from acting contrary to the Act. Officials have advised in the departmental report that this was a good way to mitigate fears that a credit union might go rogue. The select committee also reinstated the power of the Registrar of Friendly Societies and Credit Unions to suspend the business of a credit union as a useful means of protecting the interests of the members.

So, in summary, this bill is a much-needed update to the Friendly Societies and Credit Unions Act of 1982. It removes uncertainty in the current Act, and confirms 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 members. It allows friendly societies also to issue financial securities to raise money from their members. So it is with great pleasure I commend the bill to the House.

Tēnā koe, Mr Assistant Speaker. First of all, I’d just like to acknowledge and congratulate the member Stuart Smith for having a bill progress through the House. That’s a big deal. And also to the Finance and Expenditure Committee for the work that it has done to make it a better piece of legislation, and for the cooperative, collaborative approach which has occurred, which is a demonstration of how well Parliament can work.

I’m very pleased to be able to stand in support of Stuart Smith’s member’s bill. Credit unions operate on mutuality principles. They’re an essential part of New Zealand’s market for banking services, particularly for people on low incomes and beneficiaries, who can find it difficult to obtain banking services through banks. Credit unions have changed hugely over the last 35 years. The value of the assets under credit unions’ control has quadrupled in real terms, to more than $1 billion. However, the number of credit unions has fallen by 95 percent, from 284 to 13.

In 1982, credit unions controlled assets of less than $1 million on average, in today’s money. Now the average is about $80 million. There has been much regulatory change over that time. Prudential supervision and investor protection regulation have both been strengthened considerably. However, the governance framework contained in the Friendly Societies and Credit Unions Act has not kept up with the way that credit unions have changed. Although the core concepts of mutuality and common bond continue to remain as relevant as they ever were, it is clear that other parts of the Act as it applies to credit unions and associations of credit unions are out of date.

This bill will make three important sets of changes to the Act. First, credit unions will become bodies corporate with perpetual succession. Incorporation will reduce the cost of operating credit unions because they will no longer need to have internal trustees in whom the credit unions’ property vests. Instead, credit unions will have the capacity and powers to undertake activities and enter into transactions in much the same way as other entities that are legal persons.

The Finance and Expenditure Committee has made important modifications to the capacity and power provisions in the bill. Those changes will remove any doubts that credit unions must act in accordance with their objects. Giving credit unions legal personality will also better protect the interests of third parties that deal with credit unions in good faith. In addition, incorporation will have certainty and accountability benefits, because it will be clear that the responsibility for all aspects of a credit union’s strategy, governance, and oversight will rest with the board.

The second important change will be to permit credit unions to make loans direct to businesses that are owned or substantially owned by their members. This change will reduce compliance costs because it will no longer be necessary for the credit union to make the loan to the member, with the member then on-lending to the business. The enterprise lending provisions will also provide credit unions with the opportunity to grow. A number of credit unions made this point in their written and oral submissions on the bill.

The final set of changes was to provisions in the Act that relate to the registration of an association of credit unions and that describe an association’s objects. Like credit unions, associations of credit unions will become bodies corporate. This will provide associations with the same governance benefits and third-party protections.

The bill also provides welcome clarity about the range of services that associations can provide and who they can provide them to. Changes contained in the bill make it clear that other than providing services to members, associations can also provide services to non-members where authorised to do so by its rules. There had been a dispute about this, about whether associations were able to provide services to non-members, at the time that that bill was introduced in April last year. The dispute was resolved by the High Court in November 2017, in Osborne v First Credit Union. The High Court stated that “NZACU has the power to take any action or do anything directly in pursuance of [its] objects or incidental to them, provided that action is authorised by … [NZACU’s] Rules or the Act.” The changes contained in the bill are consistent with the approach outlined by the High Court.

I acknowledge that some credit unions oppose the bill in part or in whole. There were concerns, in particular, about whether incorporation would compromise or undermine mutuality, which is a defining feature of credit unions. Several supporters of the bill stated there is no incompatibility. If there were any doubts about this as a matter of law, then the select committee has removed them by adding a subsection to section 101 of the Act, which states that a credit union must operate “for the mutual benefit and assistance of its members.”

To summarise, the bill as reported back by the Finance and Expenditure Committee retains all of the main reforms proposed in the bill as introduced, so, well done, Stuart Smith. The committee has made a number of important changes that have improved the quality, clarity, and accessibility of the bill. My overall view is that this is good legislation. The changes will benefit credit unions and their members and will provide new opportunities for credit unions to compete against other banking service providers. I’d like to thank the Finance and Expenditure Committee for its work on the bill.

Thank you, Mr Assistant Speaker. I want to congratulate Stuart Smith, and I know a number of members in the House have done the same thing. But Mr Smith, well done, because you have brought—well, you’ve called it dry, yourself, in the media, and it could be described as a bit of a dry and complex issue, but it’s an important issue, not just for credit unions and friendly societies but also for their members and the people that they serve.

As I was reviewing my notes for this contribution, I thought I would just perhaps reflect on the benefit that, to my knowledge, credit unions have brought into my part of New Zealand, which is the lower South Island. So I’ll just tell a story about how credit unions can be so very useful to the communities that they serve, and more so now that there are changes to the legislation which will be able to improve the service that they provide for their communities.

So a number of years ago, well over a decade ago, there was an incident in the small southern rural town of Palmerston, which is, roughly, halfway between Dunedin and Ōāmaru. It’s a small rural service town. It’s on the coast. It’s the gateway to Central Otago. But it lost its last bank and it lost its last money machine. So that left the people who work at Macrae’s gold mine, it left farming families, and it left people who live within the Palmerston township without any banking services at all, unless they were able to go into McGregor’s tearooms and get some change or cash a cheque or something—I’m going back a wee bit, now. So it caused a lot of consternation within the community, and we do see this happening through smaller communities in New Zealand as banking services rationalise, modernise, and withdraw from rural New Zealand and provincial New Zealand. But going back 10 years or more, technology has actually moved along, away from then.

I was the deputy mayor of the Waitaki District Council at the time, and we cast around for a solution—how do we serve our community of Palmerston, who are losing their banking services? So we approached the trading banks; they were not interested, because it wasn’t a good financial proposition for them to run a cash machine in a small rural community. In the end, we ended up having a cash machine installed by the Otago credit union, and that cash machine is still there today. It served to prove that credit unions and friendly societies are there to serve their members and their members’ families, associates, and affiliates. If you wanted a concrete example—and I’m sure there are many, and I know that the member in charge of this bill, Stuart Smith, is very familiar with all the circumstances around this—of how a credit union could serve a community, then I would say that serving the community of Palmerston was one. I’ve used the machine, as do the locals. It’s in the library. It’s a community facility and it is well used and well appreciated.

The principal Act was introduced around the same time as cash machines were first installed, and so the story I’ve just told really is a piece of history now. Banking services have changed exponentially quickly since cash machines were first installed. So the Friendly Societies and Credit Unions Act desperately needs updating for a number of reasons, but I want to focus, in my contribution, on why it is so critically necessary for credit unions and friendly societies to have a modern structure in which they can operate to the benefit of their members and communities but also compete with modern banking services.

If I were to pick out one exciting development in banking services, it would be things like, obviously, contactless credit cards, which are revolutionising the way people transact and shop. There are many, many innovations in banking that credit unions and friendly societies can avail themselves of; they just need the legislative framework to do it in, which is why I’m so pleased that Stuart Smith has brought this bill to the House.

I also want to acknowledge the Finance and Expenditure Committee for working so well on this piece of legislation. Now, Stuart Smith—he probably regrets saying it because it will be repeated endlessly—did say it’s a dry piece of work; hmm, maybe. But, actually, it’s got a significant reach into every community around New Zealand.

Under the current Act, credit unions have a very complex supervisory and oversight regime. This inhibits innovation, and the last things we want to do in the banking sector in New Zealand are to create an unlevel playing field but also to inhibit innovation. I think credit to Stuart Smith is that this bill addresses that on behalf of the credit unions.

I also want to acknowledge the credit unions themselves. I know this has been a difficult pathway for them to come to this House, and they must be sitting at home feeling pretty hopeful that this House will support through its final stages this bill on their behalf, so that, finally, they can put to rest their history and they can address the future and be that supportive, community-based banking facility that their members desire and which is beneficial for communities around New Zealand.

If I just pull out one example of the benefits—so, currently, at the moment, credit unions aren’t able to provide financing to small and medium sized enterprises (SMEs) that are related to members of that credit union. It’s quite convoluted, because at the moment, currently, the loan must be made to the member, who on-lends it to the small to medium enterprise with the credit union having to take collateral security from the SME as well. Well, that’s clunky, it’s old-fashioned, and it’s an inhibition to development, and the last thing we need in New Zealand is measures in the banking system which inhibit development and growth—particularly in rural and provincial New Zealand. So that is a measure which has been addressed in this bill.

A further issue is the number of credit unions necessary to form an association. There is a need to gain economies of scale, which has seen the number of credit unions decline to 20, while, under the current Act, a minimum of seven is needed to form an association. So what the bill does is reduce compliance costs, reduce unnecessary operating costs, promote greater efficiency, promote innovation—we know innovation is happening so very quickly in the banking sector—but also, very importantly, promote accountability, accountability to the agencies who have oversight over credit unions but also accountability to their members. It is also very important—and this bill achieves this—to bring credit unions into alignment with other financial service providers in New Zealand.

There’s also the stated aim, and this is something that Stuart Smith has been so strong on throughout the process: to maintain the element of mutuality and the requirement of having a common bond between members. That is why credit unions were started in the first place, and I do applaud all those involved in the long, long passage to bring this to the House. So at this reading of the Friendly Societies and Credit Unions (Regulatory Improvements) Amendment Bill, in its second reading, I do commend the bill to the House. But just one last comment, perhaps: it is a great privilege in this House for a member to bring a bill to the House which has a great deal of meaning throughout New Zealand. I have to say that Stuart Smith has achieved this. I congratulate him and commend the bill to the House.

Mr Assistant Speaker, I rise to speak firmly in support of the Friendly Societies and Credit Unions (Regulatory Improvements) Amendment Bill. I’d like to just start off by saying that at the select committee, along with the sponsor of the bill, Mr Stuart Smith, and other committee members, this has been an incredibly satisfying bill to work upon. I think it’s been satisfying because we’ve got to a good outcome on it, but it wasn’t actually all that easy—it wasn’t easy at all.

The passage of this bill goes back a long way, actually. It was originally part of a broader set of reforms, I think, as part of a Government bill back in about 2014. In response to a range of concerns and a difference of opinions in the credit union community, it was, effectively, removed from that bill at that time. Members from the credit union movement who wanted to see progress on these issues then linked up and worked with Mr Smith to bring the bill to the House as a member’s bill.

When it came to the House and when it came to select committee as a member’s bill, none of those issues and none of those points of contention in the credit union community went away, so our job as a select committee was to work through those issues and try and get a good piece of legislation that’s fit for purpose for the sector and that will be enduring. You can never tell the future, but my hope and expectation is that we have reached that outcome. I want to especially acknowledge Stuart Smith for his work in stewarding the bill through.

I want to acknowledge other members of the select committee; it has been a very good example of the Finance and Expenditure Committee working, I think, very constructively and intelligently to take a bill, to treat submitters with respect, to take their concerns on board, and to emerge with a better and more enduring bill. From the Labour side of the committee, I particularly acknowledge Dr Duncan Webb. During the committee process, after the submissions were heard, Dr Webb and Mr Smith basically went off to the side and put their heads together around some of the tricky issues—particularly mutuality, which I’ll come to later—and arrived at some solutions to guide our way forward on the legislation.

I would also like to acknowledge the submitters in this process. We had submissions—I think it must have been from pretty much every credit union and friendly society in New Zealand, and some from overseas, in fact. It attracted a great deal of attention. The folks in the credit union community are a movement. They have a deep history, and the people who are involved in credit unions have a deep sense of mission and a belief in what they are doing. They are different from other financial institutions. Their members own them. They are very wedded to this principle of mutuality; that is, that their purpose is to serve their member owners, end of story. And there is a great deal of unwillingness to see that watered down in any way whatsoever. Then there’s the principle of common bond: that the people who are in the credit union actually have something that kind of holds them together.

If you look historically at the way that credit unions came together, there were officially two types. One were industrial credit unions, and we still have some of those. We have a New Zealand Firefighters Credit Union, a Police and Families Credit Union, and a credit union called Steelsands Credit Union, which was originally a credit union for workers who worked with steel sands in the steel industry.

💬 Andrew Bayly: Still do.

Still do. That’s right. That’s why we still have it. They submitted to us. Then we have credit unions that are based on a geographic basis. So we have credit unions like NZCU Baywide, NZCU Central—the clue’s kind of in the title. So that’s the principle of the common bond. It’s not just sort of anyone floats in there. There’s something that brings people together, and the people who lead the sector feel really strongly about that principle and their point of difference within the financial services sector. So that was part of our challenge: how to meet the challenges of the future, make sure that we had modern, fit for purpose legislation that allows credit unions to thrive and prosper and grow where necessary, but also preserve those really important parts of the DNA of the credit union movement.

If I can say, I think this is really important, because one of the things that we want to ensure that New Zealanders have access to is a financial services sector that is diverse. Some of us do feel a little uncomfortable about the relative lack of diversity in our financial services sector. We have four really big players in the big banks, who in many ways do a good job of what they do, but they’re pretty market dominant, and it’s always been my view that a healthy financial services sector provides a range of options for people at different levels.

I just want to pick up on one of the comments made by the previous speaker, the Hon Jacqui Dean, who made the point that credit unions sometimes, in 2018, are filling gaps in New Zealand society where the bigger players have withdrawn. I can think of regional and rural communities where the big banks have withdrawn, and I can think of lower - socio-economic communities in our bigger cities, and I actually think we need to keep holding the big banks to account for that. I think they need to show a bit more of a social conscience and a bit more of a commitment to New Zealand in that respect.

But, in the meantime, credit unions are often one of the institutions who keep providing a service for those people. One of the submissions that I’ll come to a little bit later in my comments is from Aotearoa Credit Union, who are a credit union very proudly based in Auckland. They say, “Our mission is to serve—not exclusively, but to a large extent—some of the lower - socio-economic communities in Auckland.” So they have access to good, trustworthy financial services that aren’t going to rip them off and are going to help them with their savings and in getting on with their lives.

Previous speakers have gone through the key objectives of the bill. I’ll just touch on those briefly, and then I want to talk to some of the changes that the Finance and Expenditure Committee has made in its considerations. The first point is that the bill allows for credit unions and associations of credit unions to incorporate. That removes, in the first instance, the need for credit unions to have what we call internal trustees. They currently have quite a complex, unique structure. We heard stories during the submissions process whereby credit unions who are wanting to lend to someone had to sort of go through this weird, very antiquated process of bringing around and getting people to sign a bit of paper—and Jack was away on holiday and that made it difficult; so quite an antiquated structure. What we’re moving to is something that is far more mainstream in terms of a standard incorporation structure. Ensuring that the credit unions’ board is responsible for all aspects of strategy, governance, and oversight—so, basically, making sure that we have really good, solid governance structures within credit unions and protecting the interests of third parties that deal with credit unions in good faith.

The second key change is—and this is really important, and a number of submitters really did stress this—permitting credit unions to make loans direct to enterprises related to members. So at the moment, credit unions can only lend to those individuals who are their members, and quite often there was kind of a Mickey Mouse sort of walk around whereby, OK, that member might want to get a small business off the ground and wants a bit of money to set up—I don’t know—a small lawnmowing business or something, but the credit union is constrained from actually lending for that business interest. So you sort of have to have this funny arrangement whereby the credit union would lend to the individual, and then it would be passed on, and that created all sorts of issues and lack of transparency. We had a number of credit unions saying to us that they would just lose business out of that. They would have credit union members who would either go to a third party to get that financing for their small business, and therefore have two different financial service sector relationships, or, because that’s too complicated, they’d just take all of their business elsewhere and get the business lending from the other organisation.

I think this is really important. It’s not about credit unions going crazy and lending all over the place—and in the select committee process we’ve refined this a bit, so the lending really is only to small to medium sized enterprises (SMEs)—so it’ll be to SMEs that the member has to have at least a 25 percent equity stake in, and it’ll be to SMEs that employ less than 20 people as well, and we’ve made sure that those provisions are in there really clearly so that we’re targeting this at the SME sector. We don’t want the sector to run away and get into risky situations where it’s lending money all over the shop.

The final point in the original bill is that it provides for associations or credit unions to be incorporated and makes it clear that associations may provide services to non-member entities that are mutual entities or cooperatives, if authorised by the association’s rules. This is really important because most of these credit unions are pretty small, and they actually rely on services provided by the association to be able to do their business. Increasingly, for those association services to be viable, they’re going to need to get a big bigger—they’re going to need to provide services to other entities. And there’s been a lack of clarity around that, so we’re making sure that within this bill that is allowable.

In the time I have remaining I want to come back to this key point around mutuality. This was the big fear from a number of submitters. We’ll put that on the record. It wasn’t just one or two submitters who were concerned about this issue of mutuality; it was a number of sizable credit unions. I think there was a genuine fear of change in the sector and a fear that something important would be lost. At select committee, we considered the option—I think it was raised by David Seymour—about whether we might have a two-tier structure where some credit unions could opt into, effectively, the new legislative provisions and some could remain as they are. We were convinced that in the end that would be overly complicated within the sector and create all sorts of confusion, but what we decided to do was to have a “belts and braces” approach, really putting in the legislation very, very clear requirements that mutuality would be required. I’ll just read out the legislation very clearly here—the new legislation, in clause 15, new section 101(1AA): “A credit union is to operate, on the basis of this Act, for the mutual benefit and assistance of its members.” That is there in black and white in the legislation, and that’s a party message I’d like to leave to ensure that those credit union associations who perhaps weren’t so sure about this legislation can be ensured that their proud history of mutuality is going to continue in this new legislation. Thank you, Mr Assistant Speaker.

Thank you, Mr Assistant Speaker. It is a genuine pleasure to rise on behalf of New Zealand First to speak in support of this bill. Firstly, I’d like to congratulate Mr Smith on his efforts and acknowledge that his work has been genuine and has reflected his commitment to our friendly societies’ industries and congratulate him again on what he has done on their behalf.

It actually feels like quite a long time since we spoke to this originally, because this was actually drawn in the last parliamentary term, towards the end. This is not a reflection of Mr Smith, but it was actually quite a fluke that it was drawn, because it was a member’s bill and it had come out of some omnibus legislation where the previous Government decided to use that mechanism to pass it through the House. So they were getting there. It was curious that it then became a member’s bill rather than a piece of Government legislation, but that is why I’ve started with congratulations on Mr Smith’s effort—because he did pick it up, and it was incredibly timely.

I not only congratulate him, but it’s been said by just about every person who’s risen in support of this legislation that the Finance and Expenditure Committee—actually, I served on the select committee in the previous term and had the privilege to do so in this term, so I have seen it progress through the select committee process in its entirety. I do want to say, it was a coming together of different political minds, but we were in agreeance before we went into the room and so we genuinely wanted to see this legislation succeed and come out the other side in such a way that those who submitted to us—all of those parties—could see their position, their belief, and their passion reflected in this legislation.

It was mentioned before, and I’ll come to it specifically soon—we talked about the mutuality issue and the substantive submissions by those who were concerned at the changes this legislation represented to what they fundamentally thought their operation and their life commitment to their friendly societies meant to them. So credit to the way those particular members came together to work on a solution.

Look, this was an issue well before it came to the select committee, and I had the privilege of working with the industry quite closely in trying to understand what the issues were. But, first, I want to acknowledge, as have others, just what it is our friendly societies and credit unions do. They are different to the big banks. They do provide a more personalised, a more customised, service, for their customers, because it is members working with, and for, members. That fundamental approach to money makes their offering so distinctly different to what we would consider to be the traditional banks—where they provide their services and to whom they provide their services set them apart, and they are to be celebrated on that. In fact, the conversations we had in select committee about financial literacy and the provision of real financial education to its members was a wonderful, wonderful thing to hear about.

So I do want to acknowledge those who submitted to the committee, because, as I have intimated, they are a passionate group. They believe wholeheartedly in what they are doing, and so it was genuinely a privilege to hear from our members of society who so passionately care about what they do. They care because they represent more than 190,000 people from our communities. They have been trying to work within legislation that was originally written in 1982, so a—brief calculation—36-year-old piece of legislation.

To be fair to them—and when you look at what they brought to the table originally—they were modernising their systems. They were trying to provide services that meet the needs of the modern clientele. But let’s be clear, we are here today because they were restrained in the way that they could move forward. So this legislation means that what this House in this reading is enabling is essentially Kiwi money working for Kiwis, which is to be celebrated. It’s for New Zealand First—and actually hearing the contributions from members on this side and actually I acknowledge, I should say, all members of the House, this is something that we should celebrate.

The submissions—I’ll quickly touch on those with the time I have left. There were some issues, but what was celebrated was the ability to lend directly to small to medium sized enterprises. So, previously, the credit unions were restrained in the way they could lend out moneys to small business. So, essentially, they had to lend it to the members themselves. Those members then had to come up with ways to then lend it to their business entities; and, actually, we were told how that created tax liabilities. It created complexity in the process, and so now we have a piece of legislation that has enabled that direct investment, and, because of this, it means we can more readily meet and adapt to the needs of our customers and be more competitive. On another point, in terms of the modernisation of the legislation, we were told that it was critically important to modernise the legal structure and operation of credit unions and associations of credit unions in New Zealand in order to better provide the technical services.

I’ll probably finish there. On the note of mutuality—I know members opposite are anxious to stand up and give their contributions, and I will try and bring this to a close quickly, but speaking to mutuality, it was important to submitters. It was a contentious issue, and the solution—although the legislation in itself didn’t actually set us down a path of removing mutuality, I think it was a creative solution in the end just to simply have it written expressly in the legislation “A credit union is to operate, on the basis of this Act, for the mutual benefit and assistance of its members.” For those credit unions who submitted to us on that area and their fear of—some described it as a slippery slope—thank you for your submissions, and so addressed in this legislation.

Congratulations to the committee again. Congratulations—I’m going to keep going if you keep doing that, Mr Bayly. Ha, ha! No—thank you, Mr Assistant Speaker. It’s a genuine pleasure to support this legislation through the House.

It’s a pleasure for me to make a contribution to this legislation, following the very learned contribution from “the Professor”, Fletcher Tabuteau. My involvement was, of course, slightly different to Fletcher Tabuteau’s, in that I wasn’t on the Finance and Expenditure Committee as it arrived before the select committee, so I did miss the opportunity to hear from the officials, and I actually take—

💬 Hon Dr David Clark: What was that member doing?

Oh, at that stage I was doing a completely different job. I was actually keeping this place in order. But, of course, we’ve had an election since then, which the member should know about because he’s now here and he wasn’t here beforehand.

But be that as it may, I did not have the opportunity to listen to the officials, and I found I was therefore at a disadvantage as I listened to the submissions. I find the officials come before these select committees whether they agree with legislation or not—and we’ve got two examples before the select committee at the moment: the overseas investment and the regional fuel tax legislation. Regardless of whether they agree with it, they’re there to work for the Government; they’re there to make sure they present the best possible information to the select committee. And I take this opportunity of just thanking the officials who appear before the Finance and Expenditure Committee for their excellent work. So I did miss the briefings but then came forward and heard the submissions, and I want to talk about those in a minute but not before I want to take this opportunity to congratulate the member who sponsored the bill, Stuart Smith.

It’s not easy to get a bill before the House and to successfully get it passed through this House in such a way as this debate’s been going tonight. First of all, Mr Smith had to realise there was a problem, and he did that. He then worked and found a solution, and then he had to work hard within the financial industry to make sure there was general acceptance of the solutions that he was proposing. He then has to write the bill. Of course, he’s got to get it selected out of the ballot. And it was a privilege then to see it get to this stage where it seems to be getting complete support by the House, and I take this opportunity of congratulating Stuart Smith.

I had the privilege of actually working with Mr Smith over the weekend—on Friday afternoon, Friday night, and Saturday—and I can see the way that he was absolutely respected. He’s well recognised. He’s well known for the hard work he does in the Kaikōura electorate. I was going to say he was revered, that he was adored, but I think that would be going over the top. But he’s certainly very well respected, and more so for this excellent work he’s done with this piece of legislation.

When I look at the bill itself and realise it’s replacing legislation dated 1982, it’s not surprising that it actually needs to be before the House. For those, and there are many other on the other side—Michael Wood, for example, probably wasn’t around in 1982. But I can tell him that we’ve been through significant financial deregulation in that time, and, of course, legislation dated that old will clearly be out of date, and therefore it is a pleasure to see it here.

But what I found really puzzling with the legislation was the way the industry itself did not have a clear position. We’d receive a submission that was fully supportive, and then we’d see another one that was fully opposed to it. We have the Aotea Credit Union absolutely supportive of the legislation, and then we had the New Zealand Credit Union of Auckland, trading as NZCU, completely opposed. You’d then get the next one, which was the Credit Union Central, which was founded in Kawerau in 1967, so you could say it represents the Bay of Plenty area; they were supportive. Co-op Money NZ were supportive. The two that I then found fascinating were the New Zealand Firefighters Credit Union, which came before the Finance and Expenditure Committee completely supportive, arguing that 35-year-old legislation had to be updated, and then we immediately heard from the Police and Families Credit Union, who were absolutely opposed to it. So it wasn’t an easy job, then, for the select committee to wade through this series of submissions and decide where to come forward and come up with a recommendation that was accepted by this House.

But I think the issue, as I go through it, was a real fear from those that opposed it about this loss of mutuality, and when we delved into that issue further—and Stuart Smith just reminded me of it—a lot of them were clouded by the experience of credit union reform in Australia, where they’d then aligned their reform to companies corporate legislation. In other words, the big mistake that perhaps was made in Australia was that they put corporate interest, company interest, ahead of members’ interest. We had no intention of making the same mistake.

One of the compelling things that struck me through the submission process was the lack of an ability to lend to a small or medium sized enterprise—not allowed under the 1982 legislation, but yet they all appeared before us and said, “Well, we’ve found a way to do it. We actually lend it to the member. We know that the member’s then lending it from the member to the business, and we get around it that way.” That just seems to me to completely circumvent legislation, and I could see no good reason at all why these credit unions shouldn’t be in a position to lend to small and medium sized enterprises throughout New Zealand, because they’re the very kernel of the New Zealand economy. We all know that. We all hear it. We heard the rhetoric even from the Prime Minister in the last few days, pointing out how important small and medium sized enterprises are for the New Zealand economy.

💬 Hon Member: Confidence is dropping, though.

But I’ve got to say that actions speak a lot louder than words, as the interjection from Tim Macindoe comes. We are working on a range of new taxes and we’re stopping investment with other legislation before the select committee, but here we have legislation recognising the importance of those small business units, their ability to seek and get capital, and now, under this legislation, they will be able to do so without circumventing the spirit of law—in fact, the very legislation of the law.

So I take this opportunity of commending this piece of legislation to the House. I take the opportunity, again, of congratulating Stuart Smith for recognising the importance of updating legislation that was dated, previously, 1982, bringing it into the 21st century and making it useful. I do hope that those credit unions that opposed it at the time will take the opportunity now to consider the opportunities that are given by the reformed legislation.

I take the opportunity, also, of recognising the importance of this particular small but very important sector within our financial industry. It plays a very valuable part, it services the members, it’s allowed to continue to service the members under this new legislation, and I hope that as a sector it will continue to profit and prosper and help those small and medium sized businesses right around New Zealand—the sort of ones that I don’t agree with what Iain Lees-Galloway said about on Sunday, “if they can’t hack it, just get out.” I think that’s a completely arrogant point of view from the Minister—what is he—for Workplace Relations and Safety. These businesses make New Zealand tick, and I think we should give them every encouragement. I hope this legislation is another avenue by which they can continue to prosper.

Thank you, Mr Assistant Speaker. It is a real pleasure to rise to speak on this bill—and in support of it—the Friendly Societies and Credit Unions (Regulatory Improvements) Amendment Bill. It probably could be called a modernisation bill as well. I do congratulate Stuart Smith for having this bill drawn and undertaking the considerable work that it’s taken. I suspect that the original conception of having a bill to incorporate credit unions was thought to be a simple task. Well, it’s certainly expanded somewhat since then.

May I also congratulate him on embarking upon a project to improve something which is such a fundamentally Labour institution, a friendly society and credit union. If we look at where these entities came from, they are in fact industrial societies in communities that grouped together for mutual support, something which I think we need to still hold dear. In fact, one of the great things I think we’re doing here is that we are in fact ensuring that we have a flexible system so that people can enter into financial arrangements, financial groupings, in a way to support each other.

It’s worth just pausing for a moment and understanding what a credit union is. It is a society of individuals, a not-for-profit society of individuals. Section 101 of the Act sets that out, and it uses some, perhaps, quaint language, language that harks back to the roots in the 1850s when these things first came about. Section 101(1)(a): “the promotion of thrift among its members by the accumulation of their savings”, and also “the training and education of the members in … wise use of money … in the management of their financial affairs”.

Also, it’s worth seeing section 101(1)(d), that the credit union can make payments for “the welfare of its members … the making of donations for charitable, cultural, benevolent, or philanthropic purposes.” Now, those are things which, perhaps, we’ve tended to lose sight of, and certainly in many modern financial institutions they don’t come close. We have financial institutions which are fundamentally corporatist, as David Carter was talking—that’s the wrong turn that was taken in Australia.

So, look, I commend the member on taking this bill, looking initially, perhaps, at a couple of minor improvements in terms of the way these institutions work, but then actually preserving and enhancing—and I congratulate him on that, that he’s in fact enhanced and strengthened the mutuality here. I won’t deny that we had some conversations about that in committee, and those conversations were robust but they were very, very fruitful. The amendment that we’ve now got is actually a dictate to credit unions: “A credit union is to operate, on the basis of this Act, for the mutual benefit and assistance [for] its members.” That is in “Objects of [the] credit union[s]” in section 101. That is a limitation on the powers of a credit union. So a credit union can’t go off on a jaunt of its own and can’t be undertaken for the profit of some third party or for anything, indeed, which falls outside of those constraints. That is a very good thing.

Can I also say that I was most impressed in committee with all of the submitters, and, as member Carter noted, they did not agree with each other. I would encourage them to keep talking. They didn’t agree with each other, but what they all had in common was a fantastic commitment to the promotion of the interests of their members. They entirely understood what a credit union was about, that it wasn’t a commercial entity, although it existed in the commercial world; it was an entity of a social nature to promote the welfare of its members. That, I think, is why this bill is such a great modernising bill, because it remembered what those values were. This is social enterprise that started in 1850, and it’s still relevant here today. So I congratulate the member on embracing that and on certainly being open to including that in the bill.

So we have got a bill there that allows incorporation, and this was perhaps the bogeyman for submitters. There was this sense that if we have an incorporation, isn’t that the same as a company? Doesn’t a company have a profit motive? Won’t things go terribly wrong? I think the lawyers on the committee accepted that that was a leap in logic, that that did not follow, but, nevertheless, we wanted to reassure the credit unions and submitters that that needn’t be the case, and that’s why we looked at that amendment, and, indeed, new section 107B, which is another amendment, made it very clear that the credit union’s powers will be limited in that way, that it can only act in pursuance of its objects. Indeed it went further and noted that a restraining order can be obtained from the High Court to make sure that those credit unions stay within their objects.

So what we have is a modernisation—incorporation. The original framework was madness. You had these really fantastic people working hard, but what they probably didn’t realise was when they signed the loan documentation and what have you, as trustees that were taking on huge personal risk and that, as was noted, the administration of the credit unions really wasn’t workable. We didn’t have a simple ability of one director to sign documentation. The trustees had to agree unanimously and, obviously, if someone’s overseas that caused all kinds of problems. So this is a much, much more sensible framework.

Then we had a further adjustment to make it quite clear that credit unions can loan to associated entities in a small business framework. Look, this is fantastic. Credit unions do occupy a particular part of the finance market. They’re not low-cost lenders; they’re not high-volume lenders. So the interest rates are a little higher but they are directly connected in with their communities. So they take a personal interest in the financial success of their members, at every level. That’s, I think, why it works.

So now, if you’ve got a member who wants to start a small business or has a small business and, wisely, has incorporated it or has it in a partnership or a trust, they don’t have to run around in circles and do legal backflips to try and get a loan from the credit union. They can simply go and say, “This is a company. I, or my family, have a controlling or a significant interest greater than 25 percent.”, and the credit union is then able to loan. Look, that is what prosperity is about. This is a Government which is absolutely committed to small business, and it’s great to see that we’re supporting this move, which will make lending money to small businesses easier, because that’s what we want to see: growth, growth in those small business areas.

So this is a bill about modernisation. What I do like is that it looks forwards and it looks backwards. It’s flexible and I think it’s really important in the financial field to not be a fetter on innovation. So with this framework, credit unions are free to work out new ways of doing what they do better, work out new ways of encouraging thrift, of educating people to use their savings wisely. Old-fashioned words, but really modern and relevant concepts. So I think it’s great that what we now have is a bill where you’ve got an incorporation framework, you’ve got an ability to lend to other entities, to broaden the net of support, and that’s really great. So we’ve got, essentially, a modern social enterprise framework where people aren’t pursuing profit; they’re mutually supporting each other in something which is supporting their communities.

As I said before, really the greatest praise goes to the people who often, for very little reward, support these credit unions, because they have dedicated a life to their communities. They’re not making lots of money. These are not-for-profit societies. There are no multimillionaire chief executives here. These are people who have dedicated their lives to their communities through these credit unions and friendly societies. I commend them for it.

This bill makes their lives easier. There’s going to be some compliance costs. We had a very clear and weather eye on those compliance costs, but what a great step forward. I do commend again member Smith for getting this bill into this House. It’s been a lot of work. I know that, and I know that every so often it was a little disheartening in that not everyone agreed with you all of the time, but I also commend you for working with some very difficult members, not least myself, and getting this through. Thank you.

Kia ora, Mr Assistant Speaker. Ngā mihi nui ki a koutou, kia ora. When you look, in the last year the big four New Zealand banks made $4.9 billion in profit and over the last 10 years they grew by three times the size of New Zealand’s GDP growth in that period over the 10 years. No wonder so many people are looking at credit unions in New Zealand. They’re looking for an alternative pathway. In fact, there’s 194,000 Kiwis that are members of credit unions. This is an area the Green Party has always supported in Parliament. We want to support cooperative ventures such as this. So we want to commend and join the unanimous support in this House in commending the member Stuart Smith for his introduction of this bill. It is a smart common-sense step forward.

What this legislation does is update the Friendly Societies and Credit Unions Act, which dates back to 1982. When you cast your mind back, all that way back in history—I mean, this was Muldoon’s “Fortress New Zealand”. We had a price freeze in New Zealand; six weeks to get a telephone. You know, you had to get Government permission to import money or products or cars. It’s such a distant country, deep in our country’s past. Given I was born in 1981, I’m feeling rather outdated and old-fashioned myself and maybe in need of some modernisation, but I commend the member for his common-sense legislation to update this 1982 legislation. The legislation is pretty simple. It brings into line similar effects with other banking and financial legislation.

People watching the television tonight mightn’t understand the issue of mutuality, but it’s a very important one. When you cast your mind back even deeper in history, the first credit union came to Germany back in 1852, and this has been a core principle in contrast to, say, the banks, which we’ve seen making such mega profits in New Zealand in the last decade.

The second issue, of course, that this legislation deals with is the subject of the debate tonight, which I think we heard from a Labour member—it was described as mickey mouse—the ability to circumvent the existing rules of lending. So we support the intent of this to make it easier for credit unions to be able to lend money to small and medium sized enterprises. We want to see that productive capital going towards investing in innovation, investing in entrepreneurialism, creating jobs—this is the modern New Zealand.

So we congratulate the member. We commend this legislation. We want to thank all those members, the public, and the experts and members of the credit unions and friendly societies who participated in the select committee. I didn’t have the privilege of sitting on the Finance and Expenditure Committee for this hearing, but I note there’s been a number of common-sense reasonable improvements. It’s quite a substantial report. So it’s something the Green Party has always supported. We commend the process and we look forward to seeing it pass in subsequent stages. Kia ora, Mr Assistant Speaker.

Kia ora. This is a split call—five minutes, Andrew Bayly.

Thank you, Mr Assistant Speaker. It is an absolute pleasure to be talking on this second reading of the Friendly Societies and Credit Unions (Regulatory Improvements) Amendment Bill. Before I start up, like all the previous speakers I just want to acknowledge the fabulous job that the good member from Kaikōura, who has promoted this bill—this is an excellent member’s bill and, as the Rt Hon David Carter said, he’s also a great electorate MP, and I can attest to that as well. I know he’s fully supported by a wonderful family.

But just turning back to the bill, this is one of those occasions when a member has come to the House, fought hard for the right thing, and seen success in the result of us moving our way and progressing this bill through to fruition. Many members’ bills, I must say, I think all add to the sum total of improving the lot for New Zealand, but sometimes you have quantum leaps. I would suggest this is a quantum leap for the 190,000 New Zealanders who belong to the credit unions around the country—190,000, as we’ve heard before. What this bill does is it makes the industry much more progressive. It makes them able to compete on an even playing field against, of course, trading banks and a number of other financial institutions operating in New Zealand. I think that is incredibly important. We all talk about promoting competition, making sure things are effective, and making sure that people have a choice. This bill, of course, helps to achieve that objective.

So one of the things I want to highlight about these credit unions and friendly societies is that they have a very special place in our financial institutions. That is, they operate on many occasions in areas where traditional trading banks don’t want to operate. We heard that in the submissions that came to the select committee: they provide a very valuable service in smaller communities that require it but often are not able to seek their banking services and other such related services.

So what does this bill do? Well, first of all, it makes some changes around allowing friendly societies to offer securities to make sure that they meet their prudential requirements. As you will know, those prudential requirements are set out by the Reserve Bank, and all banks and all financial institutions have to meet them, which is a way of making sure that they have the required capital to meet demands should the depositors in their various institutions require the money. And, of course, they’re heavily monitored by the Reserve Bank.

The second thing is it allows the co-ops to lend directly to their members. We’ve had a bit of discussion around this. We know what’s been going on: effectively, credit unions have been lending to their members, which is what they were permitted to do, but what this bill has done is extended it to make sure that it provides the opportunity for loans to be provided to a member’s partnership, if they’re involved in it, or a company, provided there’s greater than a 25 percent share or equity or beneficial interest there. Of course, that is fundamental in terms of making these activities more accessible and useful, and, as the proposal of the bill said, it stops many members from actually parking up their money in credit unions and going off to the trading bank.

The final thing is it’s dealing with the issues around mutuality. We’ve heard the definition around that—about acting in the best interests—but we put in place a back-up check where the High Court can make a restraining order on credit unions if they are seen to be acting outside their remit, or ultra vires, if we use the Latin term.

So, I’ve got to say I think this is a great bill. I’m glad to have been part of the Finance and Expenditure Committee when we worked on this bill. There were a number of submitters and I’m glad to see it working its way through the House.

Mr Assistant Speaker, I wonder if you’d just excuse me for one particular aspect of my speaking tonight. I got back to my office earlier on this evening to get a call from someone who rang me up specifically for the purpose of criticising me for speaking with my hand on my hip. So, I’m doubling down on that. It probably won’t last; maybe I’ll adopt the David Carter posture.

There is a particular aspect of this bill I wish to speak to, and I want to start with the whole ethos of credit unions. I had this ethos taught to me actually very early on in my time as a member of Parliament, before I was even on the Finance and Expenditure Committee. Credit Union Auckland contacted me and asked whether I would come out for a meeting. That was my first real introduction to what credit unions are about and they told me the ethos of a credit union: it was people helping people. It was about the small guys, the little people helping each other.

💬 Kieran McAnulty: Just like Labour.

That’s right. Just like Labour. Thank you very much, Mr McAnulty. So, I thought this a really interesting ethos, but then as he talked to me a little bit more, I found out about some of the things that credit unions do. Credit unions will open bank accounts for people with virtually no money. Credit unions will open bank accounts for beneficiaries. They will open them for people who are coming out of prison. They will open accounts that operate like bank accounts for people that the banks won’t go near. So, they fill a very real niche in our communities. They are genuinely there for the little people. I think that is why we want to look after credit unions, to enable them to survive and to flourish in the modern world, because they do have that core of helping people at their heart.

This was reiterated to me by the Westforce Credit Union. I listened to Victor Martick from the Westforce Credit Union with particular care, because the Westforce Credit Union is right next door to my office in Avondale, so they are my near neighbours. I’ve had a long talk to Victor and he had one particular concern about this legislation, and it was the issue on which many of the people who submitted were divided. Now, as Mr Carter told us, there are 13 credit unions in this country and they seemed almost evenly divided on this bill, in some aspects it sought and some that didn’t. The issue was around mutuality. They felt that being incorporated would take them away from the idea of mutuality—the idea that they were a group of people looking after each other and assisting each other.

So, as a committee, we listened really hard to that, because we could see the real merits of this legislation, we could see what the changes were trying to achieve, and we didn’t want it to get stopped by this one problem that was being raised by so many of the credit unions themselves. So, as a committee, we agreed—mutually—to put in place a new clause, a new object of credit unions, and it is there to reassure the credit unions who raised this very issue with us, who were actually concerned that they might lose mutuality.

Now, technically, according to law, they wouldn’t have, but we could see they wanted that assurance that credit unions were about people helping people, they were about the members helping each other, and they were about mutuality. So, it’s sitting there now in clause 15 of the bill, which amends section 101 of the Act. New section 101(1AA) states, “A credit union is to operate, on the basis of this Act, for the mutual benefit and assistance of its members.” It’s right there for their reassurance.

A final thought: the select committee operated with great mutuality, as well, with members helping members. May I commend Stuart Smith and also my colleague Duncan Webb, who engaged in quite a bit of mutuality, helping each other there to sort out some of the aspects of this bill. It was for me a very enjoyable experience, working on this bill. So often we’re fractious; this time we weren’t. It was a tremendous experience. I’d also like to commend the officials from the Ministry of Business, Innovation and Employment, who, I think, are very attached to their credit union legislation, and they took great care with getting it right for the sake of credit unions. I commend this bill to the House.

Thank you, Madam Deputy Speaker. It’s a privilege for me to speak on a bill that’s come to the House, the Friendly Societies and Credit Unions (Regulatory Improvements) Amendment Bill, brought the House by Stuart Smith. I think he’s fortunate to have drawn a bill out of the ballot, really, but it’s also actually quite a complicated bill for a member’s bill and I congratulate him on the work he’s done on it. It was an interesting process for me as I knew little about credit unions going into this and I have to say I wasn’t part of the committee at the time the submissions were taken, so I’ve had to do a little study on my way through that. So I came into the deliberations a little later than most, but none the less it was a very interesting process.

I want to comment on a couple of comments that Jacqui Dean made earlier in her speech on this. When you think about New Zealand, mutuals, cooperatives, credit unions, building societies, and that sort of organisation are hugely important to New Zealand. I think our isolation from the rest of the world, and probably our lack of ability to protect ourselves from the wider corporate world, probably makes them even more important. When you think about Jacqui Dean’s speech about the deep South—well, I don’t think she termed it like that; I would call it the deep dark South. But if you think about the great cooperatives in New Zealand, most of them originated in the deep South. You think about some of the bigger cooperatives like Ravensdown; Primary Producers Cooperative Society, which is now Silver Fern Farms, of course; the Alliance Group; the Farmers’ Mutual Group; Farmlands, which Lawrence Yule mightn’t like, also originated in the Outram Hotel, although it did originate also in Hawke’s Bay, in Eskdale.

So it’s an interesting history that we have in New Zealand where we have this history of protecting ourselves. I think the great thing about mutuals, cooperatives, and credit unions and things like that, is it protects the members. I think it was Gareth Hughes that mentioned the profits that the international banks make out of New Zealand every year. When you think about a credit union, it retains all of that profit for the good of its members. That’s the critical fact about those credit unions and the thing that I think is so important.

I heard David Carter earlier mentioning the demutualisation of many of the big Australian mutuals, and there was some fear among the submitters that that was a possibility that could happen as a result of this bill. When you think of the companies like AMP, in its old days, it was a mutual which held insurance policies, basically, for the good of its members. When it demutualised, all of that—well, not all of it, but a good deal of the money that originally was for the benefit of those policyholders went to the shareholders, who in some cases, of course, were the policyholders. But none the less, it was very destructive, and I think that we’ve learnt the lesson. History teaches a lot of lessons, and that’s a particular lesson that I think we learnt the hard way. I suppose, if you think about many of our lines companies and smaller power companies in New Zealand, which primarily were owned by local cooperatives, they were then, effectively, demutualised, their shares were paid out, and they were sold to big corporates, and we no longer own them, either.

These organisations are most important to New Zealand and hugely important to New Zealand’s history, and I also think they have a very real place to play in New Zealand society. So to see these credit unions, effectively, given the full powers of the banking community to act—within reason and, of course, for the good of their members—as a bank acts, it certainly gives them the opportunity to grow the services that they provide to those members, and this bill also, I think, effectively, gives the credit unions a personality which then enables them probably, in a lot of cases, to attract better people to operate them and perhaps even better governance. So I think that will also improve the service to those members and, obviously, all the profit from the activities of those associations goes back to the members. So that’s really important for the members of these credit unions, as well.

As I said, I came into this process late. It was very interesting to follow the process of the bill and to understand exactly where it’s got the credit unions to. I congratulate Stuart Smith and the select committee, which I found—as Deborah Russell said—quite collegial. I thought the discussions on this bill were very collegial, and it certainly worked well.

So with those few words, I was pleased to be part of the process. I look forward to the bill progressing through the House, and congratulations, Stuart Smith, because I’m sure it’s going to get there unanimously. Thank you, Madam Deputy Speaker—very good.

Thank you, Madam Deputy Speaker. I am stoked, as ever, to be taking a call on the Friendly Societies and Credit Unions (Regulatory Improvements) Amendment Bill.

💬 Matt King: Nine and 10—nine and 10.

Ah, thank you. I am merely a new member, so learning about things as I go has been a very steep learning curve in the last six months, and one of the things that I’ve had to learn about has been friendly societies and credit unions. Being somebody who hasn’t had to use the services of one previously, I was on a very steep learning curve.

This is a good piece of legislation. Labour does support this bill. I support this bill. I was fortunate enough to be there and to listen to the submissions on the Finance and Expenditure Committee and to listen to the heartfelt stories of people who live their lives inside this sector. As my colleague Deborah Russell said earlier, credit unions—I was pleased to find out—are the places that people go to when the banks don’t accept them. When I finally learnt about this thing and I opened my eyes and I went back to my community, I was made aware that, actually, quite a few people in my community are credit union members. I was quite pleasantly surprised to find out, as well, that there are 194,000 other credit union and building society members all across Aotearoa.

This is a good piece of legislation. I do commend the sponsor of the bill, Stuart Smith, and also too my colleague Duncan Webb, who did the heavy lifting on this particular piece of legislation—so congratulations to you both. It was a lovely experience to be sitting on a committee where everybody was singing the same song. That was a fortunate experience and, hopefully, we can do a lot more of that in the future—I am ever the optimist.

This is an Act that has needed to be brought into the modern age and into the new millennium. As the previous speaker David Carter said, this is an Act that was first drafted in 1982, and it is in desperate need of modernisation. Interestingly enough, I’ve found that many Acts that I’ve stood and talked on in the short time that I’ve been here in the House have been Acts of that ilk—Acts that were, once upon a time, drafted for a time and a place and that have kind of fallen out of use in that time.

So I’m pleased to be presiding over this and representing all of the many submitters that came before the committee. We received 20 written submissions and 13 submitters made oral submissions. Whist my colleague David Carter pointed out that one was in favour, one was against, one was in favour, and one was against, actually, the majority of the submitters were in support of the changes to the Act.

I just want to go over them and just take a short bit of time to do that, before we get down into the nuts and bolts of the bill. The Aotearoa Credit Union strongly supported the bill. They were concerned, however, about their ability under the old legislation to remain valid and competitive in the market—so for Aotearoa Credit Union, we are doing them a favour. The Association of British Credit Unions believed that the legislative framework was restrictive and that it limited the credit unions’ potential, and Co-op Money, which is one of the big players in this sector, believed that the Act was, in their words, not “fit-for-purpose” and hadn’t been for many years.

I was pleased to find that the firefighters have their own credit union, as well, and have been doing it for quite some time for their members. They were looking forward to the bill being enacted. The New Zealand Credit Union (NZCU), another big player in the scene—both NZCU South and NZCU Baywide supported the bill and welcomed the changes, and Samoa NZ Finance definitely supported the bill. They were looking forward to it becoming a full service financial institution that understood and was incredibly responsive to the needs of the Pacific Island community. So there were quite a lot of positive vibes, not just from the committee but also from the submitters, as well.

There were a couple of things that definitely stood out in the submissions, and one of them was around the issue which a lot of the speakers prior to myself have talked about, which is the ability for credit unions to retain their mutuality. There was a certain fear that by incorporating the mutualities, they were going to be slowly turned into a big, corporatised organisation. There was a strong fear about that, and it was also a big departure from what credit unions were initially set up to do, which was, on a very small scale, to look after each other. In absence of the big banks being in there, they were quite happy with that position. Those were probably some of the biggest fears that came out of the submissions that were against it. But the select committee have recommended new sections, including new section 107B(1), which explicitly states that a credit union “must act only in pursuance of its objects or in ways that are incidental to its objects,”.

The other thing that came out in the submissions was about the ability for a credit union to be able to make loans to enterprises related to its members. I remember one particular submission which said that they kind of do it anyway, but they just used another route to be able to get there. It was interesting to be able to sit there and listen to that and to hear them say, “We’re doing it anyway, but if you’re going to modernise the legislation, then why don’t you do it to make it a whole lot more cleaner? We would like to be able to lend to our members for the purpose of business.” Again, that was quite a departure from what they’d traditionally done, but that was the way that they saw themselves as being modern, credible, and responsive to their members’ needs.

Apparently, there are lots of their members that come forward looking for money for their small or medium sized business enterprises, and I’m pleased to say that the select committee recommended mechanisms to allow the credit unions to be able to make those small and medium sized enterprises accessible to loans.

There are—oh, time flies. Let me just cut to the chase, then—

💬 Erica Stanford: We’re not having fun.

Ha, ha! Sorry. Let me just cut to the chase, then—

💬 Hon Iain Lees-Galloway: More, more!

—to what we had wanted—thank you, everybody. Thank you very much—thank you very much. The bill includes measures, and I just want to ping these off very quickly—the whole point of the reforms was to simplify the objects of the credit union; to cover the activities of its benefits to members; to provide the incorporation, as I’ve just mentioned, of the credit unions; and to enable the credit unions and the associations of credit unions to have all the powers of a natural person. This is a very important piece of legislation, as I’ve said, because the credit unions play a very essential part in the market for banking services—again, as I’ve said before, particularly for people on low incomes and for beneficiaries, as well, those people that find it very difficult to walk in with their head held high to one of our big banking organisations. They can lean back on credit unions to be able to provide that kind of lending.

This is all new territory for me, but I’m proud to have sat alongside the Finance and Expenditure Committee and to have listened to the concerns of the submitters on this. I was pleased to report back to our Labour caucus that this is a bill that we should be supporting. I support the credit unions. I haven’t yet opened up an account with them, but I’m going to be monitoring the progress of credit unions, especially in my community, very closely. Yes, it was done in 1982. It is time for a refresh. Congratulations to all of the submitters, and I’m sure that they will have great pride when they hear that we have listened to their concerns and acted accordingly. To those submitters who are still feeling a little bit left outside of the scope, I hope that they can keep engaging with other credit unions to make sure that they can work together to iron out any kind of differences. Again, I commend the committee and commend this particular bill to the House. Kia ora.

It’s my pleasure to give the concluding remarks on the Friendly Societies and Credit Unions (Regulatory Improvements) Amendment Bill. Like other speakers, and particularly the Rt Hon David Carter, I joined this process later in the piece, and I do want to acknowledge the work of the member for Kaikōura, Stuart Smith, because this is a complex piece of legislation. It took me a while to get my head around it—and some of it I still don’t know—but what you’ve done and what you’ve brought before this House and this Parliament is actually a very good thing for nearly 200,000 New Zealanders and the business that that will grow on and support.

💬 Chris Bishop: He’s done a great job.

It’s a great job, and, Stuart, I know at times—and I remember you shaking your head when submitters were asking questions, and you’d already answered them, and you’d covered them off, and you’d spent hours in the background doing it. But here we are today. I actually believe this bill may, ultimately, go through and be unanimously supported, and for a member’s bill, that’s actually pretty significant.

I also want to acknowledge Duncan Webb for his role in the background and for working with Stuart to iron out some of those complexities. Actually, the committee did work together to try to resolve this, and it was fundamentally about mutuality. Most of the issues that were brought up by the submissions were about mutuality, and if you strip that back, it’s really about not-for-profit—working for each other. That’s really what this is about, and people were concerned that would be lost.

I want to bring a Hawke’s Bay story in here, because NZCU Baywide started from the Whakatū freezing works credit union in 1971. Stalwarts of my community, including people like Roy Gardiner, Iain Taylor, and the likes, set up afforestry schemes. They then set up a credit union, and it has managed to survive the closure of that freezing works and the decimation of all those jobs, to now have assets in a credit union alone of over $320 million, and 16 branches throughout the central part of the North Island. And that is because people in my community—and it’s replicated all over New Zealand—believe they can make a difference for their fellow human beings.

All this bill actually does is support them in those measures, and modernise them with today’s technology, and make sure others—and particularly the large banks—don’t have an unfair playing field. I look at the directors in the NZCU Baywide credit union today, and I’ve been to a number of their meetings. I’ve sat through how proud they are of what they can do for their communities. I’ve sat with hundreds of members—how proud they are of what their particular credit union is doing for them, and that, in my view, is to be encouraged. But it’s not some little backwater organisation. They have to run an Oracle-based platform for banking. Not just anybody can buy and afford to do that, so they have to be commercially successful.

This bill is about two things for me: one, the modernisation of the credit union legislation to allow things like a body corporate perpetual succession, and the fact that people do not need to run around in small towns like mine and get signatures for loans from several different people. It’s about bringing it into the modern era and managing some of the risks of directors and trustees. And, importantly, it’s about how those members can benefit their other affiliated entities, namely their businesses. I did hear at various AGMs I went to how disadvantaged NZCU Baywide was feeling when other banks were poaching clients for business and, ultimately, would end up with their personal accounts as well because they offered things like credit cards and a whole lot of other transactions that credit unions couldn’t. So that has all been worked through in this case, and instead of complex workarounds for business solutions, credit unions can now offer small to medium enterprises lending, such as commercial banks can. They can offer things like credit cards and, importantly, can allow these 194,000-odd members in the financial markets of New Zealand to offer products that allow for growth.

It wasn’t all unanimous, as everybody said, and that was all around mutuality, but I’m pleased to say it will be enshrined in legislation, and, from where I sit, those submissions that were concerned about that have been made null and void. The Finance and Expenditure Committee worked really well on this. They got it sorted, and I commend it to the House and hope it gets unanimous support. Thank you.

Bill read a second time.