A co-operative venture where members save together and lend to each other, mainly short-term consumer loans. The system is popular in North America, where there are some 50 000 credit unions.
Only a member of a credit union may deposit money with the credit union, or borrow money from it.A credit union differs from a traditional financial institution (banks, savings and loan, etc.) in that the members who have accounts in the credit union are the credit union's owners. The lowered profitability of most credit unions relative to banks is indicative of credit unions' focus on serving members, whereas banks must be concerned with maximizing profits in order to enhance stock performance.
Credit unions offer many of the same financial services as banks, including share accounts (savings accounts), share draft (checking) accounts, credit cards, and share term certificates (certificates of deposit) and home banking. Bank trade associations are opposed to the tax-free structure on earnings that credit unions enjoy and the American Bankers Association has identified the revocation of credit unions' tax-free status as topping its political agenda in 2004 and 2005.
In the United Kingdom Credit Unions are regulated by the Financial Services Authority, or FSA.
Currently there is a government financial initiative mainly being operated by Credit Unions to bring financial services to the disadvantaged of society.
The biggest UK Credit Union trade association is the Association of British Credit Unions Limited, more commonly known as Association of British Credit Unions, ABCUL.
Membership restrictions
Governmental regulatory agencies require that credit unions restrict their membership to defined segments of the population, such as people who live, work, worship, or attend school in a well-defined geographic area;
Mergers of smaller credit unions with disparate membership bases often result in a credit union with a wide variety of ways to qualify to join; thus, a credit union may have a much broader field of membership than that credit union's name would imply.
Credit unions generally follow the principle of "once a member, always a member," which allows current credit union membership to continue even if the individual would no longer qualify to be a member (such as changing professions or moving outside the area).
Credit Union Leagues and Associations
Credit unions in the United States have traditionally employed a state/national trade association relationship that aligns credit unions with state “Credit Union Leagues” followed by national affiliation with the Credit Union National Association (CUNA) of Madison, Wisconsin. Federal credit unions may also be members of the National Association of Federal Credit Unions (NAFCU).
Corporate credit unions
The majority of credit unions are known as natural-person credit unions, and provide service to individual consumers. Corporate credit unions (also known as central credit unions in Canada) also exist, but instead serve the needs of credit unions with operational support, funds clearing tasks as well as product and service delivery. In effect, they serve as a credit union's credit union. The largest corporate credit union in the United States is U.S. Central Credit Union of Lenexa, Kansas, which serves as a central clearing house for corporate credit unions. The largest corporate credit union that serves only natural-person credit unions is Western Corporate Credit Union (WesCorp) in San Dimas, California.
History
Credit union history dates back to Europe in 1844.
St. Mary's Bank Credit Union holds the distinction as the first credit union established in the United States and is based in Manchester, NH.
Filene also created the Credit Union National Extension Bureau, the forerunner of the Credit Union National Association, which 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 Herring, whose work to form credit unions and ensure their safe operation earned the title of “Mother of Credit Unions” in the United States.
In the same year, Congress passed the Federal Credit Union Act, which permitted credit unions to be organized anywhere in the United States.
Early credit unions were viewed as the “poor man’s bank” because they would extend credit to people who otherwise would not qualify for credit.
North American statistics
Canada has the highest per capita use of credit unions in North America, with more than a third of the population enrolled in one. Canada has a 100% affiliation of its credit unions in their trade associations, referred to as credit union leagues.
In the United States, credit unions have 86 million members, which is 43.47% of the economically active population. In the US, federal credit unions may apply to the National Credit Union Administration for Low-Income Credit Union or LICU status. This LICU status allows the credit unions to benefit from certain NCUA programs to enhance its capacity to serve underserved populations who may otherwise lack access to credit or other financial services.
As of the end of 2005, the National Credit Union Administration (NCUA) insured more than $515 billion in deposits at 8,695 nonprofit cooperative US credit unions.
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