Thursday, June 26, will mark 91 years since President Franklin D. Roosevelt signed the Federal Credit Union Act in 1934, authorizing the formation of federally chartered credit unions in all 50 states. Creating a national system of not-for-profit financial cooperatives, credit unions are still working diligently, nearly a century later, to provide thrift and sound financial products and services to hardworking Americans.
In observance of this historic milestone, the Tennessee Credit Union would like to highlight the history of credit unions and how our past has laid the foundation for a bright future.
Where it All Began: Europe
Dating back to 19th century Europe, credit unions have long existed as a beacon of community, cooperation and financial empowerment. Beginning with German politician and economist Franz Hermann Schulze-Delitzsch, the credit union movement originated in the mid 1850s when Schulze-Delitzsch created a credit society for shopkeepers and other workers who had been forced to pay high interest rates to local usurers, providing them with an opportunity to borrow money from savings pooled by society members. Ten years later, German mayor and cooperative pioneer Fredrich Wilhem Raiffeisen organized a similar set up for farmers, transporting the financial cooperative concept to rural Germany.
Setting the tone for today’s credit unions, these institutions were guided by the key principles of volunteerism; self-help; one member-one vote; and consideration of a person’s characters, as well as net worth.
Across the Pond to America
In North America, in the early 1900s, Canadian journalist Alphonse Desjardins organized the first credit union in his hometown of Levis, Quebec. Named La Caisse Populaire de Levis, or The People’s Bank of Levis, this credit union provided affordable credit to working-class families. Shortly after, Desjardins assisted with organizing the first credit union in the United States, St. Mary’s Cooperative Credit Association, in Manchester, N.H.
Thanks to the efforts of merchant and philanthropist Edward Filene, the “Father of U.S. Credit Unions” and Massachusetts Banking Commissioner Pierre Jay the Massachusetts Credit Union Act was passed on April 15, 1909. This legislation was considered the cornerstone for subsequent state credit union laws and the Federal Credit Union Act, which was passed 25 years later.
A National Movement
With a growing momentum, the credit union movement gained increased popularity in the United States. In 1920, Filene hired poverty lawyer Roy Bergengren to manage the Massachusetts Credit Union Association, a central agency designed to help other credit unions within the state. Creating a more systemized concept for the credit union model, Bergengren saw 19 new credit unions chartered in Massachusetts. Encouraged by this success, Filene and Bergengren founded the Credit Union National Extension Bureau to foster the establishment of credit unions throughout the United States.
On June 26, 1934, President Roosevelt signed the Federal Credit Union Act into law, establishing a national system to charter and supervise federal credit unions. This legislation enhanced the public’s confidence in the credit union movement, which continued to spread across the country.
With the Federal Credit Union Act enacted, visionary credit union pioneers hosted a meeting at the YMCA Camp in Estes Park, Colo., in August 1934. Each state sent one representative. E.H. Berry from Kemba Memphis made the trek to Colorado to represent Tennessee.
The representatives created the Credit Union National Association (now America’s Credit Unions) as a replacement for the Credit Union National Extension Bureau, which advocated for and fostered credit unions in the United States from 1921 until 1934. The organization’s sole purpose was to represent and support credit unions across the country.
In September 1934, credit union leaders from across Tennessee gathered in Nashville to create the Tennessee Credit Union League. League history shows that Tom Doig of the Credit Union National Association spoke to the Tennessee organizers on the purpose of credit unions and the need for forming a state credit union league. He pointed out the need for someone to watch after legislation directed against credit unions and their activities.
Over the next two decades, the credit union movement grew steadily. By 1960, more than 6 million individuals were members of over 10,000 federal credit unions.
As years went by, the financial landscape began to change. In 1977, federal legislation passed, allowing credit unions to expand their services to members by offering share certificates, mortgages and other products. As a result, credit union membership doubled, and assets tripled to exceed $65 billion. With the credit union movement growing at a rapid pace, prospective members flocked to join the new member-owned financial institutions being established all across the nation.
Today’s Credit Unions
For more than 90 years, since the authorization of the Federal Credit Union Act, the U.S. credit union system has grown by over 4,000 credit unions and has evolved to become a $2.3 trillion system, serving more than 142 million members nationwide.
By providing affordable, community-driven financial services, the history of credit unions and the credit union movement remains a fascinating one characterized by innovation, cooperation and a commitment to serving the needs of the individuals and communities they serve — all groundwork laid by our founding fathers.
To view a historical timeline of the credit union movement, visit the National Credit Union Administration at ncua.gov/about/historical-timeline.
