Credit unions have some pretty progressive sensibilities, which might make them seem like a brand new way of banking—or at least a response to growing customer dissatisfaction with big banking institutions. However, if you take a look into credit union history, you’ll be surprised to find that credit unions are nothing new. In fact, the earliest credit unions date back to 1850s Germany; though the first credit unions arrived in America in the early 1900s.
What is not a surprise is how popular credit unions and their fair-minded business practices became. The first credit union in North America was opened by our neighbors to the north, Canada. In 1901, Alphonse Desjardins opened La Caisse Populaire de Levis in Quebec after being shocked by the high interest rates charged by local moneylenders. From there, it was on to America, where Desjardins helped to found St. Mary’s Cooperative Credit Association in Manchester, New Hampshire in 1909.It was from these humble roots unions grew across the country.
The birth of the U.S. credit union movement
This single credit union was only the beginning of a full-fledged credit union movement. While New Hampshire was founding its first credit union, Massachusetts passed the first state law organizing and regulating credit unions. With some help from Desjardins and businessman Edward Filene, the Massachusetts Credit Union Act passed in April 1909 and went on to become the basis for future state and federal credit union law.
Filene, known as the father of U.S. credit unions, went on to form the Credit Union National Extension Bureau in 1921 with the goal of spreading credit unions in states throughout the nation. While Filene donated nearly $1 million to the organization, Executive Secretary Roy Bergengren traveled the country to help credit union organizers appear before state legislatures, and generally get the word out about credit unions.
CUNEB was instrumental in passing credit union law in 26 states and revising law in five others. However, the organization’s mission ended in 1934, when President Roosevelt passed the Federal Credit Union Act. This act made it easy for individuals in any state to establish their own credit unions under the authority of the Bureau of Federal Credit Unions. Credit unions continued to grow, and by 1960, there were 6 million members who belonged to more than 10,000 credit unions nationwide.
Credit unions grow beyond their roots
The 1970s brought the first major changes to credit unions since Roosevelt passed the Federal Credit Union Act. As the assets controlled by credit unions continued to grow, their numbers tripling between 1970 and 1979, members needed more options and more security. In 1970, the National Credit Union Administration took over for the Bureau of Federal Credit Unions and brought with it the National Credit Union Share Insurance Fund, which insured credit union deposits much like the Federal Deposit Insurance Corporation did for bank accounts. In 1985, funds insured by NCUSIF were finally said to be backed by the full faith and credit of the United States Government, officially making credit unions as safe as any bank. As of 2008, the NCUSIF now matches the FDIC’s insurance amount of $250,000 per account.
But legislation was also in progress to allow credit unions the option to offer more services to more members. In 1977, legislation allowed credit unions to offer additional services to their members, like checking accounts and mortgages. In 1980 and 1998, legislation allowed credit unions to be more flexible about their field of membership, thus allowing for more Americans to be able to join.
The result of all of this change?
By the 80s, the total credit union deposits were over $65 billion. Today, total deposits are over $1 trillion, with over 91 million credit union members nationwide. With so many people putting their faith, and their hard-earned cash, into the credit union movement, why not join in?
Credit unions have a proven track record of looking out for their members and their continued growth certainly indicates they’re doing a good job—and their 91 million members would most likely agree.