Celebrate CU History on International Credit Union Day®
International Credit Union (ICU) Day® has been celebrated on the third Thursday of October since 1948. For its 73rd anniversary, this year’s theme is “Building financial health for a brighter tomorrow.” ICU Day® is brought to you by World Council of Credit Unions (WOCCU) and Credit Union National Association (CUNA), two organizations that have helped support the credit union mission for decades.
Being a member of a credit union means being part of a movement. Credit unions have their roots in serving the underserved, improving the financial situations of rural and lower-income groups. Many changes in United States law and policy have affected the development of credit unions across the country since their inception.
Let's explore the evolution of credit unions in the United States.
The Origins of Credit Unions
The first credit society was started in the mid-nineteenth century in southern Germany by pioneer Friedrich Raiffeisen. Raiffeisen observed farmers who were often at the mercy of loan sharks and from there, inspiration struck. In 1864, he created what was, in essence, the first credit union: a rural cooperative lending institution.
In 1900, journalist Alphonse Desjardins spread the idea of a cooperative financial institution from Europe to Canada. Desjardins co-organized La Caisse Populaire de Levis, or The People’s Bank of Levis, Quebec. This organization set the precedent for North American credit unions as we know them today.
The first credit union in the United States formed several years later in April 1909. Located in Manchester, New Hampshire, Mary’s Cooperative Credit Union opened its doors with Desjardins’ assistance.
Meanwhile, in Massachusetts, Edward A. Filene, known previously for the department store chain with his namesake, partnered with banking commissioner Pierre Jay. The duo helped organize hearings to create credit union legislation in their state.
With the assistance of Filene and Desjardins, the first credit union law was passed: the Massachusetts Credit Union Act. This law would later influence the crucial Federal Credit Union Act of 1934. Filene, for his efforts, became known as the “Father of U.S. Credit Unions.”
Governing the Credit Unions
Filene hired attorney Roy F. Bergengren in 1920 to expand what would soon be known as the credit union movement. For his efforts, Bergengren was credited with developing the modern credit union system.
The following year, Filene and Bergengren began the Credit Union National Extension Bureau (CUNEB) to form new credit unions, enact new state laws, and promote credit union philosophy. Over the next decade and a half, 38 states and the District of Columbia passed credit union laws.
In 1932, following the effects of the Great Depression, Bergengren met with Texas Senator Morris Sheppard to discuss a need to move from state to federal law. The idea was that federal law would act as “a sort of blanket insurance policy for all of our state laws” according to Bergengren, as well as change how the movement was organized.
The Federal Organization of Credit Unions
On June 26, 1934, President Franklin Delano Roosevelt signed the Federal Credit Union Act into law. This authorized federally chartered credit unions across the United States. The Federal Credit Union Division was placed in the Farm Credit Administration, which was responsible for addressing the financial problems of rural America. In October of that year, Morris Sheppard Federal Credit Union became the first federally chartered credit union.
In 1942, federal supervision of credit unions was transferred to the Federal Deposit Insurance Corporation (FDIC).
Shortly after, in 1948, the Federal Credit Union Division had its name changed to the Bureau of Federal Credit Unions and was moved yet again from the FDIC to the Federal Security Agency.
Federal and state-chartered credit unions were granted an exemption from federal income tax due to the Revenue Act of 1951.
In 1953, the Bureau of Federal Credit Unions moved yet again to the new Department of Health, Education, and Welfare. The Bureau became self-sufficient from fees on federal credit unions.
From 1966 to 1972, the Bureau of Federal Credit Unions and other federal agencies launched Project Moneywise. This project was designed to expand credit union services into low-income and moderate-income areas across the United States to improve the financial literacy of these communities.
Protecting Credit Union Members
On March 10, 1970, Congress created the National Credit Union Administration (NCUA) to oversee federal credit union operations. The National Credit Union Share Insurance Fund (NCUSIF) formed alongside the NCUA and insured credit unions up to $20,000 in deposits. Before this, credit unions did not have any federal deposit insurance. Over the course of the 1970s, credit union assets tripled as they began offering new services, including mortgage lending and share certificates.
This deposit insurance increased to $40,000 in 1974, then $100,000 in 1979, matching the amount of deposit insurance coverage for banks provided by the FDIC.
In early 1998, the Supreme Court ruled that federal occupation-based credit unions must consist of an occupational group having a single common bond. Without sharing that bond, potentially millions of credit union members could have lost their membership. In the following months, the Credit Union Access Act was passed by the House of Representatives and U.S. Senate. Finally, on August 7, 1998, President Bill Clinton signed the Credit Union Membership Access Act of 1998 (HR 1151) into law. This act restored membership flexibility to credit unions, allowing for multiple common-bond credit unions.
Credit Unions Today
Deposit insurance would finally reach today’s amount in 2008, where it was increased to $250,000 per depositor when President George W. Bush temporarily raised the FDIC and NCUA deposit coverage. In 2010, President Barack Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act, making this $250,000 protection amount permanent.
Credit unions have thrived as more people join the movement and learn what options exist to improve financial wellness. In 2012, federally insured credit union assets exceeded $1 trillion for the first time, and they have only continued growing as credit unions offer members a secure alternative to traditional banking.
Thanks to the pioneers who brought cooperative financial solutions to the people, institutions like American Heritage Credit Union have had the privilege of helping our surrounding communities to make a lasting difference.
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