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Credit Union History

Related resources: What is a Credit Union?, Credit Unions in the USA

From their origins, credit unions were unique depository institutions created not for profit, but to serve members as credit cooperatives. The earliest financial cooperatives date back to the beginning of 19th century in England. In the mid-1800's, Germany was the first home of credit unions as we know them today:

  • Democratically governed;
  • Each member has one vote;
  • Member-elected board of directors; and
  • Volunteer based.

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These early German credit unions were organized by Herman Schulze-Delitzsch and Friedrich Raiffeisen. The crop failure and famine of 1846 caused Schulze-Delitzsch to organize a cooperatively-owned mill and bakery which sold bread to its members at substantial savings. Schulze-Delitzsch took this cooperative notion to address the needs of credit. In 1850, he organized the first cooperative credit society, known as the "people's bank."

Raiffeisen’s goal was to provide credit to farmers. He formed the Heddesorf Credit Union in 1864 to help German farmers purchase livestock, equipment, seeds and other farming needs.

In 1900, the credit union concept crossed the Atlantic to Levis, Quebec, where Alphonse Desjardins organized La Caisse Populaire de Levis. A court reporter, Desjardins became aware of the outrageous interest being charged by loan sharks and organized the credit union to provide relief to the working class.

In 1909, Desjardins helped a group of Franco-American Catholics in Manchester, New Hampshire, organize St. Mary's Cooperative Credit Association--the first credit union in the United States.

Spurred by the attention of Edward Filene, a merchant and philanthropist, and Pierre Jay, the Massachusetts Banking Commissioner, the Massachusetts Credit Union Act became law April 15, 1909. The Massachusetts law served as a basis for subsequent state credit union laws and the Federal Credit Union Act.

With the upswing of the U.S. economy in the 1920's, the credit union movement became increasingly popular. People had more money to save and were able to afford products such as automobiles and washing machines. However, they needed a source of inexpensive credit. Because commercial banks and savings institutions were not generally interested in providing consumer credit, credit unions began growing.

In 1920, Roy Bergengren, a poverty lawyer, was hired by Edward Filene to manage the Massachusetts Credit Union Association and promote the development of credit unions in that state. Within a year, Massachusetts chartered 19 new credit unions.

Encouraged by this success, Filene organized and Bergengren managed a national association to promote credit unions throughout the country, the Credit Union National Extension Bureau. By 1925, 26 states had passed credit union legislation and by 1930 that number grew to 32 states with a total 1,100 credit unions.

President Roosevelt signed the Federal Credit Union Act in 1934, forming a national system to charter and supervise federal credit unions. Credit unions grew steadily in the 1940s and 1950s and by 1960 credit union membership amounted to more than 6 million people in over 10,000 federal credit unions.

In 1970, the National Credit Union Administration (NCUA) became an independent federal agency and the National Credit Union Share Insurance Fund was formed to insure members’ deposits. The 1970s brought major changes in the products offered by financial institutions and credit unions found they too needed to expand their services. In 1977, legislation expanded services to credit union members, including share certificates and mortgage lending. The 1970s were years of tremendous growth in credit unions. The number of credit union members more than doubled and credit union assets tripled to over $65 billion.

Deregulation, increased flexibility in merger and field of membership criteria and expanded member services characterized the 1980s. High interest rates and unemployment in the early '80s brought supervisory changes and insurance losses. With the Share Insurance Fund experiencing financial stress, the credit union community called on Congress to approve a plan to recapitalize the Fund.

In 1985, federally insured credit unions capitalized the National Credit Union Share Insurance Fund by depositing 1 percent of their shares into NCUSIF, a federal fund backed by the "full faith and credit of the United States Government."

During the 1990s and into the 21st century, credit unions have been healthy and growing. Credit union failures are low and the National Credit Union Share Insurance Fund prospers.

There are about 7,950 active status federally insured credit unions. Almost 90 million members (89,854,941) with $679 billion on deposit (679,416,086,824).

Source: National Credit Union Administration

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