History of Credit Unions
Foundation formed in England
The first credit union originated in 1844, when a group of weavers in Rochdale, England, established the Rochdale Society of Equitable Pioneers. By selling shares to members, they were able to raise capital to buy goods in bulk to get lower prices than retail. They then sold these goods at a savings to the members.
The Idea Spreads to Germany
The idea spread to Germany in the late 1840’s, where Hermann Schulze-Delitzsch and Friedrich Wilhelm Raiffeisen created the first true credit unions in 1852 and 1864. Raiffeisen founded a credit society in Flammersfeld, but it did not catch on because it depended on the charity of the wealthy for its support.
In 1864, Raiffeisen organized a new credit union, with the same principles that are still fundamental to credit unions today. Raiffeisen’s goal was to provide credit to farmers, so he formed the Heddesorf Credit Union to help these farmers purchase equipment, livestock, seeds, and other farming necessities at substantial savings.
Credit Unions in North America
The concept of credit unions spread across the Atlantic to North America in 1900. A court reporter named Alphonse Desjardins organized the first credit union in Canada, the La Caisse Populaire de Levis. Desjardins did this to provide relief to the working class, as became more and more aware of the insane interest rates being charged by loan sharks. In these times, and 50 years ago in Germany, the majority of people were poor and interest rates charged by the people with money were financially crippling.
Desjardins helped organized the first credit union in the United States in 1909 as well. He helped a group of Franco-American Catholics organize the St. Mary’s Cooperative Credit Association in Manchester, New Hampshire.
Credit Unions become law in the United States
The success of the credit unions in Canada and the emergence of the credit union in Massachusetts influenced Pierre Jay, the Massachusetts banking commissioner, and Edward Filene, a Boston merchant.
Filene and Jay helped to organize public hearings on credit union legislation in Massachusetts, leading to the passage of the first state credit union act in 1909. The Massachusetts Credit Union Act became law on April 15th, 1909. This law served as the basis for future state credit union laws, as well as the Federal Credit Union Act.
Growth of credit union laws in other states, and credit unions overall, was very slow until the 1920’s, which experienced a financial boom. People had more money to save and were able to afford more products, like cars, but they needed inexpensive credit. Commercial banks were not interested in lending consumer credit, so the popularity of credit unions grew.
Filene created the Credit Union National Extension Bureau in 1921 to help establish more effective credit union laws on a state and federal level, and spark the growth of more credit unions. Filene hired a Massachusetts attorney, Roy Bergengren, to support the Bureau’s efforts. Edward Filene was so dedicated to the cause that he devoted more than $1 million to the project.
When Bergengren began his efforts, there were only 199 credit unions in the United States. By 1925, 26 states had passed credit union laws; 419 credit unions were serving 108,000 members. And by 1930, that number grew to 32 states with a total of 1,100 credit unions.
Credit unions banded together into leagues on a state-wide basis. Leagues provided financial and legal advice, organizing know-how, and an instrument for credit unions to seek favorable state legislation.
Credit Unions on a Federal Level
President Roosevelt signed the Federal Credit Union Act in 1934, forming a national system to charter and supervise federal credit unions. Credit unions grew slowly in the 1940s during World War II, but the war’s end brought renewed credit union growth.
In 1945 there were 8,683 credit unions in the country; by 1955 there were 16,201, and by 1969 the U.S. movement reached its peak of 23,876 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.
Since the 1970’s, the total number of credit unions has declined as smaller credit unions merge into larger ones, to provide a larger array of services. But the actual membership in credit unions has continued to climb to this day.
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: NCUA.gov
Source: Creditunion.coop
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