AUCKLAND, N.Z.–A long-awaited set of reforms set to pass Parliament has credit unions saying the changes will allow them to become more competitive.
The proposed changes will cut their costs, allow them to lend directly to businesses, and assume the rights of a corporation, according to the New Zealand Herald.
"These changes will allow the industry to service their members in a way that will keep them up with their competition in a modern world,” said National MP Stuart Smith.
Jonathan Lee, COO with Co-op Money, the trade group that represents 12 credit unions, said New Zealand’s credit unions have been disadvantaged by outdated laws that have created an uneven playing field.
"Currently credit unions don't have a corporate form, so all the assets of a credit union have to be held in trusts," Lee explained to the New Zealand Herald. "Unlike a company that can hold assets like plants and equipment and buildings, the credit union itself can't own any assets or hold any money received by its members."
Smith's bill will allow credit unions to become incorporated, removing the need for them to have internal trustees to hold any assets.
Lee told the Herald this would not change credit unions' fundamental approach of being membership-focused.
"They are still mutual organizations. Each member still has one vote, irrespective of how much money you have with that credit union. They will still have a purpose to provide for financial literacy and to promote savings,” Lee said. "All those things that define a credit union, around people helping people and being member-owned, none of those things change."
At present, credit unions have also been limited in who they can lend to. They can give loans to individuals or trusts, but not directly to businesses. The bill would change that by permitting CUs to provide financing directly to small-to-medium enterprises which were owned or closely associate with members, the New Zealand Herald reported.