CREDIT UNION HISTORY
History of the Credit Union Movement

Credit Societies: 1852-1864
Two men, Hermann Schulze-Delitzsch and Friedrich Wilhelm Raiffeisen, were responsible for creating the first true credit unions in Germany in 1852 and 1864. During 1849, Raiffeisen founded a credit society in Flammersfeld, Germany, but it depended on the charity of wealthy men for its support. Raiffeisen remained committed to that concept until 1864, when he organized a new credit union along principles still fundamental today.

The credit societies in Germany, and similar institutions founded by Luigi Luzzatti in Italy, were the forerunners of the large cooperative "banks" that abound in Europe today. In 1871, credit union legislation was considered in Massachusetts. This attempt and later efforts in the 19th century to start U.S. credit unions were not very successful.

The Idea Goes West
It was a Canadian who transplanted the credit union to the Western Hemisphere. In 1900, Alphonse Desjardins organized a credit union (caisse populaire) in Levis, Quebec. The reasons were the same as those in Germany 50 years before. People were poor, interest rates were financially crippling, and the credit union offered a way out.

That first Canadian credit union was small by modern standards. The first savings deposit was only 10 cents; the first collection from all the members totaled only $26. Even today, in some countries, credit unions start small.

But Desjardins persevered and devoted a good part of his life to credit union development in North America. He founded other credit unions, including the first one in the United States, in 1909 in New Hampshire.

Jay, Filene — The U.S. Overture
Two Americans became profoundly influenced by Desjardins' efforts: Pierre Jay, the Massachusetts banking commissioner and Edward A. Filene, a Boston merchant.

Filene discovered credit unions in a village in India in 1907. He had stopped in Calcutta and met a government official who took Filene out into the countryside. There Filene first observed a village credit union in operation and was immediately interested. Back home again, he began reading about credit unions to strengthen his knowledge.

Filene was perhaps the ideal American to give the credit union idea a push. He was a progressive thinker for his time. He had begun profit-sharing plans for his employees, instituted other novel fringe benefit programs, was the founder of the "bargain basement" idea in department store operation, allowed his employees to engage in collective bargaining and arbitration,established minimum wages for female workers, and advocated a five-day, 40-hour week. In the early 1900s, such ideas were revolutionary. Besides his creative approach to business, Filene was also one of the founders of the U.S. Chamber of Commerce.

As banking commissioner, Pierre Jay had made a study of unauthorized banking practices in Massachusetts. He learned that several groups of employees in the commonwealth had started their own savings and loan organizations. These groups resembled what Henry Wolff, a European, had described as "people's banks." Jay believed that these small associations were providing a needed service, but he wanted to recommend a way to make them legal.

From Wolff's writings, Jay turned to the work of Desjardins and others. He began a chain of correspondence with Desjardins. This resulted in a 1908 conference in Boston in which Desjardins, Jay, Filene and other public-spirited citizens participated. Working with Desjardins, Jay prepared the legislation for what was to become the first general state credit union act in the United States.

Getting It Together
Public hearings were held on the credit union legislation in Massachusetts. Most of the testimony at first came from Desjardins. His comments had a major impact. Then Filene came into the picture. His testimony helped clinch passage of the first general state credit union act in 1909.

However, the next decade saw no great explosion of credit unions, despite continuing efforts. Fewer than 10 states passed credit union laws, many of which proved unworkable; the Massachusetts Credit Union Association, the first of its kind, grew slowly.

Waking Up the Nation
In 1921, Filene decided that the only way to get credit unions off the ground was to seek federal legislation and increased state legislation. He created the Credit Union National Extension Bureau and hired a Massachusetts attorney, Roy F. Bergengren, to help him.

Bergengren and the Bureau were charged with seeking effective credit union laws in all states and at the federal level. They hoped to create a nationwide association of credit unions to provide leadership and services to existing credit unions, and to organize new credit unions. During this period, the credit union was seen as a small, tightly knit membership institution.

Bergengren, the Organizer
When Roy Bergengren began his efforts, there were only 199 U.S. credit unions, but during the next 13 years (until 1934), the credit union movement grew dramatically.

Filene poured more than $1 million of his own money into the project. The Bureau began to lobby across the country. Bergengren appeared before state legislators, laws were passed, and volunteer organizers were initiated into the "movement." By 1925, 15 states had passed credit union laws; 419 credit unions were serving 108,000 members. By 1935, 39 states had credit union laws and 3,372 credit unions were serving 641,800 members.

The Growth of Credit Union Leagues
During the formative years of the credit union movement, credit unions quickly discovered that they could expand faster and provide better service if they 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 use in seeking favorable state legislation. But something more was still needed.

CUNA is Created
In 1934, the credit union idea spread so fast that 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 as a confederation of state leagues. CUNA replaced the Credit Union National Extension Bureau and Roy Bergengren became CUNA's first managing director.

In the same year, Congress finally passed a federal credit union act, which permitted credit unions to be organized anywhere in the United States. The passage of this landmark legislation created a choice for credit unions. They could incorporate under either state or federal law. This system of dual chartering persists to the present day.

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. 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.

Begun with a $25,000 loan from Filene, CUNA Mutual 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 the leading provider of financial services to credit unions and their members worldwide, offering lending, protection, financial, employee and member solutions through strategic partnerships, technological innovations and multiple service channels. The mutual insurers of the CUNA Mutual Group are owned by their policyholders and operate to serve their best interests.

The second growth move by CUNA was the formation of CUNA Supply Cooperative in 1936. CUNA Supply was designed to supply forms and other materials to credit unions. Starting with only three employees in a basement shop, CUNA Supply is now part of CUNA Strategic Services, Inc., which provides needed products and services to credit unions.

The War Years and After
World War II halted progress of the U.S. credit union movement, just as it did many other sectors of the economy.

With the end of the war came renewed credit union growth in the United States. 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 then, the number of credit unions has declined, as many smaller credit unions have merged into larger ones that usually offer more services.

Membership, however, has continued to climb. The number of credit union members doubled during the 1970s to more than 43 million by the end of the decade. Today, more than 87 million Americans are credit union members.

A Global Affair
In 1954, CUNA established an international services department (World Extension) to extend its reach beyond North America. There was, as yet, no central worldwide organization of credit unions.

This changed in May, 1964, when CUNA revised its charter to become CUNA International, taking under its wing credit unions and associations in Canada, Latin America, and elsewhere. But events called for the creation of an independent, worldwide organization for credit unions.

World Council Is Born
The rapid growth of credit unions in other parts of the world and in emerging nations led to the creation in 1970 of the World Council of Credit Unions. CUNA once again became 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; the World Council emphasizes overall progress and continuing unity of the worldwide movement.

Growth and Challenge
The spectacular growth of credit unions in the United States in the past decade has made them an important part of the nation's financial system. But this new status has also increased the competitive pressure as other financial institutions have sought to offer more consumer services.

The role of CUNA and Affiliates and the state leagues is to protect the gains credit unions have made and to prepare them to operate in the new financial world of the future without losing their commitment to the unique credit union tradition of service to people.

The Credit Union System
The Credit Union System which includes credit unions, and state and national credit union organizations, is one of the strongest financial networks in the world.

Through this cooperative effort, credit unions of all sizes are able to offer their members a broad range of sophisticated financial services. They can combine their individual strength with other system components to coordinate their marketing, upgrade their management and technical skills, and speak with one powerful voice in Washington, D.C.

On the national level, CUNA and Affiliates provides credit unions with the products, services, and leadership needed to compete in today's financial marketplace. These products and services are available to credit unions through league affiliation, and dues and fees support.

Commitment to Consumers
Together, the Credit Union System is one of the largest and strongest financial organizations in the nation. Credit unions, leagues, CUNA and Affiliates, CUNA Mutual, the World Council, and the many other credit union support organizations work together to meet member needs.

The credit union idea has grown to many millions of people, but there is literally no limit to what the movement can achieve in terms of growth, service and most important, as an instrument of cooperation and harmony between people everywhere.

The California Credit Union League wishes to thank CUNA for their permission to use the
History of the Credit Union Movement.