Great History. Great Future!
For about 100 million Americans, a Credit Union is their preferred financial institution. As a not-for-profit financial cooperative, Credit Unions are able to return their earnings to the members in the form of lower fees and loan rates as well as higher interest on deposits. Along with the financial benefits, Credit Unions believe in social responsibility as an essential value for a financial institution.
The first working credit union models sprang up in Germany in the 1850s and 1860s, and by the end of the 19th Century had taken root in much of Europe. They drew inspiration from cooperative successes in other sectors, such as retail and agricultural marketing. Similar institutions were independently developed somewhat earlier in Japan in the early 19th century. Known as village unions, each person of the village union could borrow fund interest free for 100 days, while the entire membership shared the cost in case of default. Credit unions are best identified by their adherence to cooperative principles, especially related to membership and control.
Friedrich Wilhelm Raiffeisen fathered the credit union idea to help impoverished farmers in Flammersfeld in western Germany who were ruined by drought and indebted to unscrupulous moneylenders. Raiffeisen helped organize over 200 credit cooperatives in Europe. He spent the rest of his life promoting the ideas of self-help as the answer to personal finance problems. All credit unions today follow Raiffeisen’s original plan—“not for profit, not for charity, but for service.”
In 1908, Edward A. Filene, Boston merchant and philanthropist, is sparked in the credit union movement after a trip to India. He worked tirelessly to spread the idea in the United States. The following year, Pierre Jay, a Banking Commissioner of Massachusetts who studied Desjardin’s work, introduced a bill in Massachusetts to provide incorporation, recognition and legal standing for small savings and loan associations as financial institutions. Though Desjardin testified, his testimony as a foreign citizen carried little weight. The bill passed thanks to testimony from Edward Filene, a wealthy Boston merchant who saw credit societies operate in Calcutta, India. Desjardins organized the first U.S. credit union in a church parish, St. Mary’s Parish Bank.
In response to a letter written to state governors by President Howard Taft, Wisconsin enacted credit union legislation in 1913. Edward A/ Filene established the Credit Union National Extension Bureau to seek enactment of credit union laws in all states, promote organization of new credit unions, encourage creation of state credit union organizations and prepare the way for a national association of credit unions. Filene appointed Roy Bergengren, a Massachusetts attorney, the Bureau’s executive secretary.
The Credit Union National Extension Bureau, the forerunner of the Credit Union National Association was formed as a confederation of state leagues at a meeting in Estes Park, Colorado in 1934. Attendees at the meeting included Dora Maxwell who would go on to help establish hundreds of credit unions and programs for the poor in her lifetime and Louise McCarren Herring, whose work to form credit unions and ensure their safe operation earned the title of “Mother of Credit Unions” in the United States.
Today, there are approximately 5,800 credit unions available in the U.S.