Credit Union History
Credit Union beginnings in Europe
Simple credit union behavior tracks back to 1844 by weaver pioneers of Rochdale, England. These early European pioneers sold shares to fellow members to raise capital in order to buy bulk goods for cheaper than retail prices, then sold those goods back to their members at a lower price. In essence, this entitled them to having the first credit union system.
Germany is recognized as the country holding the first official credit union, established by Franz Hermann Schulze-Delitzsch in 1852. His successful lending system expanded throughout urban communities and he went on to develop a highly successful urban credit union system. The first rural city credit union was established by Friedrich Wilhelm Raiffeisen in 1864, in Heddesdorf (now part of Neuwied) Germany. The organizational methods Raiffeisen refined there, which levered what is today called social capital, have become a hallmark of the global credit union identity.
North American Credit Unions
In 1901, the Caisse Populaire de Lévis in Quebec, Canada became the first Northern American credit union. It required only a ten cent down payment. Founder Alphonse Desjardins, was moved to take up his mission in 1897 when he learned of a Montrealer who had been ordered by the court to pay nearly $5,000 in interest on a loan of $150 from a moneylender. Drawing extensively on European precedents, Desjardins developed a unique parish-based model for Quebec: the caisse populaire.
The first Credit Union in the United States was built in 1908, in Manchester, New Hampshire. It was called St. Mary's Bank Credit Union of Manchester, and today is the location of the American Credit Union Museum. In 1910, Massachusetts became known for having the first non-religious Industrial Credit Union in 1910, established by Pierre Jay, then Massachusetts Commissioner of Banks and Edward Filene, and the the Woman's Educational and Industrial Union. In 1934, FDR signs the Federal Credit Union Act into law – passed in large part due to Texas Senator Morris Sheppard and Texas Congressman Wright Patman. A service organization, the Credit Union National Association (CUNA), forms to provide insurance, auditing, and supplies to credit unions, as well as offering programs for the less fortunate.
Timeline of Major Credit Union Events Throughout the World
From the beginning, the credit union movement employed a simple notion - that people could achieve a better standard of living for themselves and others by pooling their savings and making loans to neighbors and co-workers.
1844 — Rochdale, England — workers and weavers create a democratic consumer cooperative establishing the credit union principles used today.
1849 — Germany — Hermann Schulze-Delitzsch, a lawyer, establishes a credit society to help shopkeepers and urban workers find relief from loan sharks. Friedrich Raiffeisen, considered the German founder of credit cooperatives, also actively works to ensure better financial services for the working class.
1901 — Levis, Quebec, Canada – First North American credit union established.
1909 — Manchester, New Hampshire – First U.S. credit union established.
1921 — Boston, Massachusetts – Edward A. Filene, a wealthy merchant considered the "father of U.S. credit unions," and Roy F. Bergengren, a lawyer, organize the Credit Union National Extension Bureau, with goals to enact credit union laws and form credit unions. Filene's ideas stemmed in part from a 1907 visit to India where he observed a system of agricultural cooperatives.
1934 — Washington, D.C. – President Franklin Delano Roosevelt signs the Federal Credit Union Act into law – passed in large part due to Texas Senator Morris Sheppard and Texas Congressman Wright Patman. A service organization, the Credit Union National Association (CUNA), forms to provide insurance, auditing, and supplies to credit unions.
1967 — Washington, D.C. – the National Association of Federal Credit Unions (NAFCU) is established to protect the Federal Credit Unions' interests in the nation’s capital
1970 — The National Credit Union Administration (NCUA) forms to oversee Federal Credit Unions. The Federal Credit Union Act is amended to authorize federal insurance for members’ savings accounts.
1980 — Deregulation in the financial services industry creates new product offerings like share drafts (also known as checking accounts) and Individual Retirement Accounts (IRAs). Plus, a rate ceiling on savings accounts is removed.
1982 — NCUA interprets the Federal Credit Union Act to allow individual select employee groups to join a credit union, as long as members in each group share a common bond (i.e. manufacturing, high-tech, education, etc.).
1990 — In conjunction with four North Carolina banks, the American Bankers Association (ABA) files suit against NCUA and the AT&T Family Federal Credit Union over the 1982 interpretation of the Federal Credit Union Act. Bankers are concerned with the authorization to allow select employee groups to join AT&T Family Federal Credit Union who are unrelated to the original credit union sponsor and don’t necessarily share that common bond. The bankers appeal the lower court ruling that favored credit unions.
1996 — Following an adverse ruling from the District of Columbia Federal Appeals Court, an injunction is issued prohibiting federal credit unions from taking in members unrelated to their "core" membership group and common bond. This ruling is appealed to the Supreme Court and a partial stay is issued permitting members to sign-up in existing "unrelated" employee groups, but prohibits new employee groups to be added.
Feb 1998 — On February 25, in a 5-4 vote, the Supreme Court rules against consumer choice by upholding the Appeals Court decision. The Supreme Court rules that banks have a stand in suing NCUA.
Mar 1998 — the House of Representatives Banking Committee unanimously passes HR 1151, the Credit Union Membership Access Act, which protects consumers’ rights to join credit unions.
Apr 1998 — the full House passes HR 1151 by a vote of 411-8.On July 28, the U.S. Senate’s version passes with a vote of 92-6 culminating in a rewrite of the 1934 Federal Credit Union Act.
Aug 1998 — President Bill Clinton signs the Credit Union Membership Access Act into law, giving federal credit unions the authority to add select employee groups with 3,000 or less employee/members, even if they don’t have a relationship with a credit union’s original sponsor.
Dec 1998 — NCUA implements their new field of membership rule Interpretive Ruling and Policy Statement 99-1, disregarding legislative intent. The rules promulgated disregarded statutory language regarding the "local" nature of credit unions and guidelines regarding an immediate family member or roommate's eligibility for membership. The rule also defines a "local" area as a single county with fewer than 300,000 persons or multiple contiguous counties with fewer than 200,000 persons.
2001 — The "Access Across America" initiative is unveiled by NCUA. Chairman Dennis Dollar stated that the initiative's purpose was to facilitate credit unions as they seek to reach out and provide lower-cost financial services to as many Americans as possible. Dollar also stated in Credit Union Magazine that: You must realize that everything you would like to see in the FOM rules will not, and, frankly, cannot be included under existing law. But we can make sure the existing law works to its fullest extent and works better than it does today for those millions of Americans who still need access to credit unions.
Feb 2003 — The Small Business Administration expands the use of the guaranteed loan program, opening its eligibility rules to allow partnerships with all credit unions. Loans guaranteed by the federal government do not count against the aggregate business lending cap.
Mar 2003 — The Interpretive Ruling and Policy Statement 03-1 (IRPS 03-1) is issued by NCUA. This statement alters FOM rules to create Trade, Industry and Profession (TIP) wide charter; and broadening the community charter to include any single county, city, or political subdivision regardless of population as a well defined, local community. IRPS 03-1 also expands the definition of "local community" for purposes of community charters to include residents of "any city, county, or smaller political jurisdiction, regardless of population size." Under the proposal, "local community" also includes any metropolitan statistical area (MSA), or part of it, with fewer than one million people. Political jurisdictions with populations up to 500,000 (up from 200,000) also are included. The proposal allows credit unions to seek charters for even larger areas.
Apr 2003 — NCUA approves Tooele FCU's application to expand community charter to 6 Utah counties comprising two-thirds of the state's population.
May 2003 — Goldenwest and America First convert to federal charter serving the exact same field of membership as Tooele FCU.
The NCUA sends out Letter 03-FCU-04 claiming that "Any federal credit union may include in its field of membership, regardless of size, location, or charter type, communities satisfying the definition for serving the underserved (investment) areas in the Federal Credit Union Act."
Jul 2003 — ABA, Utah Bankers Association, and 4 banks sue NCUA over Tooele's application.
Sep 2003 — An amendment to the member business loan rule is made by the NCUA board. It allows flexibility in determining loan amounts counted against the cap. The board also acts to permit Credit Union Service Organizations to originate business loans and relaxing risk-weighting standards.
Oct 2003 — The first in a series of member business lending workshops is convened by NCUA. These workshops are directed at facilitating the involvement of new credit unions into business lending. See Press Release.
Jul 2004 — The NCUA approves the community charter for "LA Financial." Its new charter includes 9,637,494 potential members making it the largest single community charter approved to date. The approved "local community" includes a population larger than 42 states and the geographic area exceeds the combined square miles of Rhode Island and Delaware.
Apr 2004 — The NCUA's Director of Examination of Insurance issues a memo encouraging NCUA's Regional Directors to "evaluate and consider granting a waiver for all loans made as part of SBA's 504 program." The waiver helps credit unions fund business loans by suspending the value limits required in the member business loan rule during the first four months of the lending process.
Dec 2004 — The U.S. District Court for the District of Utah invalidates Tooele's FCU charter ruling that the proposed community is not local. U.S. District Judge Dale Kimball states that the NCUA "cannot act as a rubber stamp or cheerleader for any application brought before it."Community CU and OmniAmerican CU begin conversion process to become mutual savings banks.
Aug 2005 — The NCUA invalidates Community and OmniAmerican's conversion votes because of the manner in which the disclosures were folded, causing both credit unions to sue. After criticism from Members of Congress and the judge hearing the case, NCUA settles to allow both credit unions to convert.
Nov 2005 — ABA announces two lawsuits against NCUA. The first lawsuit challenges NCUA's approval of "underserved" expansions for community chartered credit unions. The second suit alleges that NCUA approved a community charter in Pennsylvania that is not "local and well-defined" as necessitated by statute.
Source: Randolph Brooks Federal Credit Union and American Bankers Association