In a preview of the future for small, niche credit unions and mutuals around Australia, New Zealand’s Firefighters Credit Union is facing up to the reality of unsustainability – and fighting to convince its membership that a merger with a larger credit union is inevitable.
Earlier this year, the NZFCU attempted a merger with credit union Bayside but members voted down the plan.
Now they are trying again to convince their firefighter members to accept the inevitability of a merger, with a vote slated for the November AGM.
"The difference this time is we won’t be recommending which credit union we can merge with – rather just asking members to vote whether they support the option," said acting chair Mark Virtue in a message to members on the NZFCU website.
"Remaining as a going concern is no longer a viable option because of rising compliance costs and our inability to make a profit," Virtue said.
The other option, if members continue to oppose a merger, is "an orderly wind-up" of the credit union that began with a 1976 meeting at the Central Fire Station in Wellington.
The bootstraps Wellington Firefighters Credit Union grew into the New Zealand Firefighters Credit Union in 1981, allowing nation-wide membership.
In an earlier message to members, Virtue warned that, "without changes to how we operate, our current model is unsustainable in the long term", saying increasing regulation has made New Zealand "a tough place to do business".
"The financial sector is highly regulated and the fact that we are a small credit union rather than a mainstream bank doesn’t protect us from the audit and compliance expenses that are associated with our industry. As a niche business we have not had enough growth to compete with the likes of audit fees, which for example in our 2020 financials increased by NZ$156,000 alone," he said.
"In the last 12 months we have aggressively sought to reduce the costs that we could control. We literally run on the ‘smell of an oily rag’, and have reduced our outgoings in areas like wages (down 21 percent), legal costs (down 50 percent), accounting fees (down 33 percent) and how we run our office.
"However, [we have] other expenditure which we are powerless to control and required by regulations to have, continue to increase. Such a cost is our audit costs, which have increased over 400 percent in the last three years."
It is a similar story to the dilemma facing the small industry organisations scattered around Australia.
The NZFCU membership will voted on the merger proposal at the upcoming AGM on November 4, and fireworks are likely before its firefighter members go out to tackle any Guy Fawkes-related blazes the next day.