The modern credit union dates as far back as 1852 by Franz Hermann Schulze-Delitzsch in Germany. Schulze-Delitzsch create what would become the first successful urban credit union system. Twelve years later in 1864, the first rural credit union was formed by a man named Raiffeisen, as a means of serving small communities that were considered “unbankable” by larger banking institutions due to their small, seasonal cash flows.
By 1888, the credit union had spread to other nations, including Austria, England, France, Italy and the Netherlands. The largest banking group in Austria still bears the Raiffeisen name and Rabobank, which is available today in the United States, also pays homage to the founder of the agricultural credit union.
The Federal Credit Union Act was first signed into law in 1934 by President Roosevelt. This law authorized the formation of credit unions that were federally chartered in all states. The reasoning behind this law was to make credit available to customers through a system of non-profit, cooperative unions nationwide.
Credit Unions Come to America
The very first credit union in North America was in Quebec, Canada. It began operations on January 23, 1901 and required members to make a 10-cent deposit to join. By 1908, credit unions became available in the United States. In fact, the State of Massachusetts was the first in our nation to establish legislation in 1909 that allowed credit unions to be established for its citizens. Established in 1911, St. Anne Credit Union in New Bedford, Massachusetts is currently the oldest credit union in all of Southeastern Massachusetts.
In 1934, President Roosevelt signed the Federal Credit Union Act into law authorizing the formation of federally chartered credit unions in all states. The purpose of the federal law was to make credit available and promote thrift through a national system of nonprofit, cooperative credit unions. Soon after, the Bureau of Federal Credit Unions was established and housed within the Farm Credit Administration, eventually moving to the Federal Security Agency before settling in the Department of Health, Education and Welfare.
Credit Union Growth in the United States
Credit unions grew throughout the 1940s, 50s and 60s, reaching as many as 6 million members across 10,000 federal credit unions throughout the nation. By the 1970s, the Bureau of Federal Credit Unions became an independent federal agency, reforming itself as the National Credit Union Administration of NCUA. This department was created to supervise and charter federal credit unions.
Later, the National Credit Union Share Insurance Fund (NCUSIF) was formed as a means of insuring credit union deposits, similar to the FDIC used by traditional banks. The NCUSIF was created for credit unions without the use of tax dollars, supported solely by the credit unions themselves.
In 1977 legislation was passed that helped to expand the types of services available through credit unions, such as mortgage lending and share certificates. By the end of the 70s, credit unions had grown considerably in the United States with the number of members more than doubled and the amount of assets tripling to over $65 billion.
Expansions continued in the 1980s, as deregulation helped to boost flexibility in the area of merger and membership criteria. However, unemployment and high interest rates brought many changes and losses to the financial industry. Congress was called on to approve a plan to help recapitalize the Share Insurance Fund to reduce stress experienced by the federally insured credit unions. In 1985, federally insured credit unions helped to recapitalize the NCUSIF by depositing 1% of total shares into the Share Insurance Fund. The now fully capitalized NCUSIF has fail safe features and is backed by the United States Government.
From the 90s on through today, credit unions in the United States have been steadily growing at a healthy pace. Despite economic issues that have plagued countries around the world, the Share Insurance Fund has been able to maintain an equity level that is healthy and sustainable.
St. Anne Credit Union in New Bedford, Massachusetts, serves customers that live or work within the counties of Bristol and Plymouth. Established on August 3, 1991, St. Anne Credit Union is a member-owned, non-profit financial institution with more than 3100 members and over $18,000,000 in assets.