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History
credit union history
Credit union history dates to 1864, when Friedrich Wilhelm Raiffeisen founded
the first credit union in Heddesdorf (currently known as Neuwied) in Germany. By
the time of his death in 1888 credit unions had spread to Italy, France, the
Netherlands, England and Austria, among other nations. The Raiffeisen name is
still used by Raiffeisenbank, the largest banking group in Austria (with
subsidiaries throughout Central and Eastern Europe), Rabobank (Netherlands) and
similarly-named agricultural credit unions in Germany.
The first credit union in North America, the Caisse populaire de Lévis in
Québec, Canada, began operations on Jan. 23rd, 1901 with a ten cent deposit.
Founder Alphonse Desjardins, a reporter in the Canadian parliament, was moved to
take up his mission in 1897 when he learned of a Montrealer who had been ordered
by the court to pay nearly $5,000 in interest on a loan of $150 from a
moneylender. Drawing extensively on European precedents, Desjardins developed a
unique parish-based model for Québec: the caisse populaire.
In the United States, St. Mary's Bank Credit Union of Manchester, NH holds the
distinction as the first credit union. Assisted by a personal visit from Alphone
Desjardins, St. Mary's was founded by French-speaking immigrants to Manchester
from Quebec in November 1908.
Pierre Jay, a central banker and Edward Filene, a Bostonian merchant, were
instrumental in establishing enabling legislation in Massachusetts in 1908.
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. The legislation
allowed credit unions to incorporate under either state or federal law, a system
of dual chartering that persists today.
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. However,
today, credit unions are no longer lacking in prestige and are used widely, for
example, among university employees and large telecommunications corporations.
In the United States 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. However, bank holding companies
and their affiliates aggressively compete to provide services to credit unions
through their ATM networks, corporate checking accounts, and Certificate of
Deposit programs.
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