The history of credit unions began in 1844, with a group of weavers in Rochdale, England, who established the Rochdale Society of Equitable Pioneers. They sold shares to members to raise the capital necessary to buy goods at lower than retail prices, and then sold the goods at a savings to members. In doing so, they became the first credit union. The movement then spread to Germany in 1850, Canada in 1901 and the United States in 1908. This movement is outlined in the documents below.
Cooperative Activity in Europe
The first cooperative was organized in 1844 by a group of workers in Rochdale, England. That same year in Germany, Victor Aime Huber developed some of the early European cooperative theories, and the idea of credit societies was a part of this effort. Hermann Schulze-Delitzsch and Friedrich Wilhelm Raiffeisen created the first true credit unions in Germany in 1852 and 1864. In 1849, Raiffeisen founded a credit society in Flammersfeld, but it depended on the charity of wealthy men for its support. In 1864, Raiffeisen organized a new credit union along principles that are still fundamental today. These German credit societies – along with similar institutions that Luigi Luzzatti founded in Italy – were the forerunners of today’s large cooperative “banks” in Europe.
Cooperative Activity in Canada
In 1900, Alphonse Desjardins organized a credit union (caisse populaire) in Levis, Quebec. As in Germany 50 years before, people were poor, interest rates were financially crippling, and the credit union offered a way for individuals to advance their financial situation. That first Canadian credit union was small by modern standards. The first savings deposit was only 10 cents and the first collection from all the members totaled only $26. But soon Desjardins founded additional credit unions, including the first one in the United States, in 1909 in New Hampshire. Organization of new Canadian credit unions has tapered off since the 1960s, reflecting a trend toward fewer, larger organizations. Membership in Canada now totals more than 4.9 million.
Cooperative Activity in America
The success of the cooperative movement in Canada influenced many Americans, including Pierre Jay, the Massachusetts banking commissioner, and Edward Filene, a Boston merchant. Jay and Filene helped organize public hearings on credit union legislation in Massachusetts, leading to passage of the first state credit union act in 1909. However, fewer than 10 states passed credit union laws, and the growth of the Massachusetts Credit Union Association very slow. In 1921, Filene created the Credit Union National Extension Bureau, to work towards establishing effective credit union laws in all states and at the federal level. He poured more than $1 million of his own money into the project, and hired a Massachusetts attorney, Roy F. Bergengren, to support the Bureau’s efforts. Bergengren appeared before state legislators, laws were passed and volunteer organizers were initiated into the “movement.” When Bergengren began his efforts, there were only 199 U.S. credit unions. By 1925, 15 states had passed credit union laws; 419 credit unions were serving 108,000 members. And by 1935, 39 states had credit union laws and 3,372 credit unions were serving 641,800 members. 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.
By 1934, credit unions and leagues recognized the need for a national organization. At a meeting at Estes Park, Colorado, the Credit Union National Association (CUNA) was formed. It replaced the Credit Union National Extension Bureau and Roy Bergengren became CUNA’s first managing director. Also in 1934, Congress passed a federal credit union act permitting credit unions to be organized anywhere in the United States. The legislation allowed credit unions to incorporate under either state or federal law, a system of dual chartering that persists today. Almost immediately after its organization, CUNA recognized a need for credit-union-oriented insurance services and standardized office supplies. In 1935, CUNA formed the CUNA Mutual Insurance Society. In 1996, CUNA conducted a movement-wide study, the Renewal Project, and changed its bylaws to:
Make credit unions members of both CUNA and their league (they previous were affilated with CUNA only through their league);
Provide for credit union election of 18 of 24 CUNA Board members; and
Allow credit unions to vote on CUNA bylaw and dues changes.
Today, CUNA provides credit unions with the products, services, and leadership needed to compete in today’s financial marketplace.
Creating CUNA Mutual
When CUNA recognized a need for credit-union-oriented insurance services and standardized office supplies, it formed the CUNA Mutual Insurance Society. Declaring, “The Debt Shall Die With The Debtor,” CUNA Mutual developed a Loan Protection Insurance policy followed shortly by Share Life Insurance. These programs provide for specified compensation to the beneficiaries of deceased or disabled credit union members. CUNA Mutual began with a $25,000 loan from Edward Filene, and had receipts of only $145 during its first month of operation. Three months later, it was faced with its first claim, for $40, and had to borrow money to pay it. Today, the CUNA Mutual Group is one of the largest insurance companies in North America and writes more credit life insurance than any other company in the world.
Post WWII Era
Although the U.S. credit union movement saw little progress during WWII, 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. Since the 1970s, many smaller credit unions have merged into larger ones that offer a wider range of services. Although this has caused the number of credit unions to decline, membership continued – and continues – to climb. The number of credit union members doubled during the 1970s to more than 43 million. Today, nearly 85 million Americans are credit union members.
In 1954, CUNA established an international services department (World Extension) to extend its reach beyond North America. Ten years later, CUNA revised its charter to become CUNA International, to encompass credit unions and associations in Canada and Latin America. However, the rapid growth of credit unions in countries across the world, including emerging nations, created the need to form the World Council of Credit Unions in 1970. CUNA then returned to a “national” organization, and joined confederations in Canada, Africa, Asia, Australia, Latin America, and the Caribbean as members of the World Council. National and regional confederations concentrate on development and guidance of credit unions in their areas, and the World Council emphasizes overall progress and continuing unity of the worldwide movement. Thus, credit unions now have expanded around the globe, and their collective presence has made them an important part of the nation’s financial system.