Legislative Action
A Brief History of Credit Unions
The first true credit unions were founded in Germany in the 1850s and 1860s. As the 20th century began, the credit union idea surfaced in Canada, where in 1900, Alphonse Desjardins organized a credit union in Levis, Quebec.
As in Germany 50 years earlier, people were poor, interest rates were financially crippling, and the credit union offered a way out.
That first Canadian credit union was incredibly small by modern standards. The first savings deposit was only 10 cents; the first collection from all the members totaled only $26.
Desjardins devoted a significant 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 New Hampshire in 1909.
Canada’s successful efforts profoundly influenced two Americans: Pierre Jay, the Massachusetts banking commissioner, and Edward A. Filene, a Boston merchant and founder of Filene’s department store.
Filene discovered credit unions in a village in India in 1907. Filene had stopped in Calcutta and met a government official who took him into the countryside. There he 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. The two men helped organize public hearings on credit union legislation in Massachusetts, leading to passage of the first state credit union act in 1909.
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 as a confederation of state leagues.
When President Franklin D. Roosevelt signed the Federal Credit Union Act into law, the stated purpose was to “promote thrift and thwart usury.” ¹
¹ Source: Credit Union National Administration (CUNA.org)
Return to Legislative Action home page
A Brief History of the Banking Industry’s Attacks on Credit Unions
In 1998, the banking industry wanted to limit credit unions’ ability to accept new groups of members. Credit unions were accepting new groups of members to accommodate the changes going on in their communities.
Banks attacked credit unions suing to prevent credit unions from accepting new groups of members. That lawsuit found its way to the U.S. Supreme Court, which interpreted the law in favor of banks.
Following the Supreme Court ruling, credit unions approached members of Congress and asked for the law to be changed to reflect our unique needs, and help us as we adapted to our changing communities.
Credit unions undertook this challenge in the face of a withering assault of bank propaganda aimed at influencing our elected Representatives and Senators.
Because of the response of the 70 (now 90) million credit union members affected by this legislation, the federal credit union statute was ultimately changed with implementation of House Resolution 1151 (known as HR 1151), the Credit Union Membership Access Act. It received an overwhelming vote of 411-8 in the House of Representatives and 92-6 in the U.S. Senate.
From the time it was filed, until the time it reached the President’s desk was sixteen weeks, a remarkably short time frame for Congressional action and an indicator of the broad base of support credit unions can muster when under attack.
Since then, the banking industry has continuously aimed their propaganda and their megabucks lobbying efforts at our elected legislators in an attempt to destroy credit unions as competition.
They have tried to convince our representatives that credit unions are too big, have outlived their usefulness, or are not true to their charters and pose unfair competition for the banks.
Larger credit unions such as SCCU, which have grown by continually providing value to their member-owners, are particular targets.
The banking lobby has mounted a full-scale assault against the modernization of some of the regulations affecting credit unions. For example, the bankers are trying to convince you and your elected representatives that credit unions should be governed by the Community Reinvestment Act (CRA), as are banks.
To fully understand the absurdity of the banking industry’s request, it is helpful to understand what CRA is and does.
Years ago, banks operated predatory deposit and lending practices, through which they would collect deposits from poorer communities and use them to invest in other, more affluent communities. This practice drained the resources of non-affluent communities and significantly impeded opportunities for growth and wealth building in those communities.
Several such practices, usually called “redlining”, went on for many years until the government stepped in and passed CRA, which requires banks to track the reinvestments being made in the communities in which they operate.
Having been repudiated, the banks are now claiming credit unions have an unfair advantage because we are not required to demonstrate how much we give back to the communities in which we operate.
The very nature of a credit union represents community reinvestment, since members wholly own their credit union. We reinvest in the community with every transaction and every decision. Our behavior is governed by our structure, not by a government dictate.
The specific subject of the banking industry’s current attack is not particularly important. What is important is to understand what is at stake: That if the banking industry has its way, credit unions will be subjected to a series of unnecessary legislative burdens, under the guise of “protecting the consumer”, all in hopes that by the time the 90 million Americans who depend on credit union services notice what is being done to them, it will be too late. Then, your member-owned option to profit-driven banks will have been legislated out of existence.
Thankfully, there are legislators who recognize the value that credit unions offer to their communities. SCCU, in partnership with the League of Southeastern Credit Unions, can provide you with the names of legislators who are known supporters of credit unions.
