History of Credit Unions
The 1800s: A Movement Begins
The Early 1900s: Credit Unions in New York
1915 - 1922: Organizing an Association
The 1920s: Facing New Challenges
The 1930s: Progress in New York & Beyond
The 1940s: War Obstacles
The 1950s & 1960s: New Services, New Legislation
The 1970s & 1980s: Relocation and Expansion
The 1990s: Legislative Victory
The 21st Century
In the 1840s, a group of European innovators shared an exciting vision: to develop a cooperative credit society focused on serving members, particularly skilled workers needing money for business purposes. This vision soon became a reality, and over the next decade, the cooperative movement experienced great success throughout Germany and other European countries. By 1850, the first credit society was established in Germany... and within nine years, it was joined by 182 other "people's banks" serving 18,000 members.
It was only a matter of time before the cooperative movement found its way to North America, and in 1901, Alphonse Desjardins organized La Caisse Popular in Levis, Canada. Just seven years later, the first credit union in the United States, La Caisse Popular Ste. Marie in New Hampshire, opened for business.
During this time, the credit union movement experienced exciting growth in the United States. Massachusetts was the first to pass credit union law in 1909, and New York was close behind.
The New York credit union movement began in the early 1900s due to the efforts of the Russell Sage Foundation. The Foundation was established in 1907 to investigate social problems and propose and sponsor practical solutions.
One of the Foundation's focuses was the chattel and salary loan business in New York City. At the time, people in need of a loan had three options: ask their employers; apply for a bank loan, which was difficult to obtain; or turn to an illegal ‘loan shark' and accept the high interest rates. After a 14-month study of the situation, the Foundation decided to create a Division of Remedial Loans. In 1910, Arthur Ham was appointed first director of the Division, and Cary W. Hayes was employed to investigate the prevalent industrial savings and loan schemes.
Hayes' study, combined with the new success of credit unions in Massachusetts, led the Foundation to recognize credit unions as a valuable, needed solution for New York's issues. In 1912, Hayes contacted Alphonse Desjardins for assistance in writing a credit union law for New York.
After months of travel and collaboration between Desjardins and the Foundation, a select group of men drafted a credit union bill for the state of New York. This bill came to be recognized as the Eisner-Pollock bill, which was quickly followed by the Cole-Roosevelt bill. Both served similar purposes, which were, according to an article from the New York Herald, "to furnish facilities for saving dimes and quarters, smaller amounts than ordinarily are deposited in savings banks."
On May 17, 1913, the Eisner-Pollock bill officially became law with the approval of the Governor. Credit unions could now legally be formed. In early 1914, employees of the Bing and Bing Real Estate firm formed New York's first credit union: the Speedwell Credit Union. Within the year, they were joined by two other pioneering credit unions.
In 1915, 11 credit unions received charters... and the numbers continued to grow. This growth presented a need for a central organization, and in 1917, the New York State Association of Credit Unions was formed.
Three groups assisted with the association's formation. The Russell Sage Foundation's Division of Remedial Loans provided financial support, leadership, office space and secretarial service. The National Committee on People's Banks, which included Desjardins and Edward Filene, and the Credit Union National Extension Bureau (CUNA's predecessor) also provided assistance.
The New York State Association of Credit Unions was officially reorganized in 1921. Nineteen credit unions met in May of 1921 to establish goals and structure for the Association. At the time, credit unions were still a new concept in the U.S., and it was important to build awareness. Credit unions also faced a long, tedious process when seeking authorization from the Banking Department to organize.
Led by Robert McIntyre, president of the Municipal Credit Union, the Association laid the groundwork for the future by taking on a vast number of responsibilities. Legislative, publicity and advisory committees were established. Together, they worked to charter new credit unions, publicize the movement, study and prepare legislation, provide a communications network for credit unions, standardize procedures and work for the common benefit of all New York credit unions.
As obstacles were conquered, the growth of credit unions began to accelerate. Americans interested in borrowing who were often overlooked by banks and savings institutions began turning to credit unions. By 1922, there were 100 New York credit unions with assets totaling over $460,000.
In 1925, the New York State Association of Credit Unions faced a new challenge. The Russell Sage Foundation determined that the Association had enough credit unions to support itself and discontinued financial support. To continue operating, the Association instituted the use of a sliding scale for membership dues.
Because the Association was no longer able to hold meetings at the Foundation, an office was opened on West 42nd Street in New York City. The space was shared by a representative of the Credit Union National Extension Bureau.
The subsequent years were challenging, and membership decline led the Association's leadership to reexamine their goals and consider reconstructing membership.
In 1927, the New York State Association of Credit Unions changed its name to the New York State Credit Union League. Through the name change, the League hoped to demonstrate uniformity with other state leagues in hopes of eventually forming a national organization.
In addition to the name change, the League also added the following amendments to its constitution:
- to spread knowledge of the credit union movement more generally among the public and to encourage and assist in the formation of new credit unions in the State of New York;
- to furnish a forum for discussion of problems of mutual interest to its members and to bring credit unions in the State of New York into closer relationship with each other;
- to study proposed legislation and prepare needed legislation affecting credit unions in New York State;
- to maintain facilities for exchange of credit information among members;
- to establish and maintain the highest possible standards among credit unions;
- to maintain contact with other state members in touch with national credit union progress; and
- to perform such other functions for the service of its membership as may from time to time become advisable.
Armed with a new identity and well-defined goals, the League focused on progress and, in 1928, made another step forward by contracting Aetna Life Insurance Company to provide members with life insurance.
Credit unions also experienced a significant boost when Attorney General Albert Ottinger's investigation of usury in New York resulted in a committee recommendation that employers consider establishing credit unions. This emerging view of credit unions as a viable, stable alternative only deepened during the Depression.
As the nation suffered through the Depression, credit unions remained stable. Because their reserve requirements were adequate to meet the contingencies of the 1930s, most credit unions were able to come through the Depression not only unscathed but, in several cases, even stronger than before.
In 1930, a credit information exchange was created, enabling associational, parish and open membership credit unions to make records of all borrowers' and co-makers' names. The exchange, which opened with over 25,000 records, helped credit unions minimize delinquent accounts and eliminate bad accounts. That year also marked an important milestone in the nationwide credit union movement: the 1,000th credit union was formed.
1931 was the last year for popular ‘open' credit unions, which offered membership to ‘any person' or ‘any adult of good moral character.' At the recommendation of the Banking Department, the credit union law was amended to limit new credit unions to groups with strong common bonds or residential communities with populations of fewer than 10,000.
The New York State Credit Union League continued to focus on progress in the 1930s. Five League chapters were organized in Brooklyn, Buffalo, Capitol City, New York City and Rochester to promote closer cooperation, idea exchange and membership growth.
The League and its members also continued to advocate for fellow New Yorkers. After noticing that many members were applying for loans to pay medical bills, officials from the Municipal Credit Union approached Mayor LaGuardia and, as a result, the Health Insurance Plan of Greater New York was established. The two men behind the plan were Frank Rubel, the League's general counsel, and William Reid, president of Municipal Credit Union.
The League was also active in discussions with Congress to develop legislation that would allow for expanded credit union growth. In 1934, Congress passed the Federal Credit Union Act, allowing credit unions to be established anywhere in the country. Under the Act, credit unions could choose whether to be state- or federally chartered. Because a large number of states still did not have a state credit union law, this allowance was crucial.
Now that the credit union movement had been elevated to a new level, a national organization was needed. State leagues united in Colorado to form the Credit Union National Association (CUNA), which replaced the Credit Union National Extension Bureau and was led by Roy Bergengren.
One of CUNA's first priorities was to provide insurance for credit unions and members. In 1935, CUNA Mutual Insurance Society was established, replacing Aetna. CUNA Mutual quickly developed a loan protection insurance policy and life savings insurance for its members.
In 1936, the League affiliated with CUNA, bringing national resources to the credit unions of New York. At the time of affiliation, the League had 170 member credit unions with 55,000 members and assets totaling $8,000,000.
Another important event occurred in 1936 when Governor Lehman joined the New York State Employees Credit Union, becoming the "First Credit Union Governor in the United States."
The credit union movement had flourished in the 1930s, but a new decade brought a second world war and a new concern: inflation. The U.S. government attempted to curb inflation by issuing Regulation W, which limited the time allowed for repaying loans. It also severely restricted the granting of installment credit. Savings growth diminished, and the number of loans dropped. As a result, the organization of credit unions slowed, and many credit unions were forced to liquidate.
As the decade came to an end, however, credit unions began to bounce back. On October 21, 1948, the first International Credit Union Day commemorated 100 years of credit unions.
By 1950, New York was the home of 790 credit unions with 364,824 members and assets totaling $67,658,719.
The 1950s brought a huge push to organize credit unions across the country. In 1956, New York reported a record 1,006 credit unions in the state. To keep member credit unions informed, the League began publishing CU-VUES, a monthly bulletin. In 1958, the League purchased its own building at 204 Fifth Avenue in New York City.
At the annual League convention in 1959, a stabilization services program was established to help assure members of the safety of joining a credit union. The stabilization program was used until 1970, when all credit unions were required to be insured under the NCUA Share Insurance Fund.
The League also established the Sidney Stahl Memorial Foundation, a charitable arm of the League tasked with assisting New York credit union volunteers with their educational and training needs.
Throughout 1959, New Yorkers once again played a large role in advocating legislation. James P. Eagan of Schenectady, a member of the CUNA Legal and Legislative Committee; Louis Bonderefsky, League treasurer; and Congressman Abraham J. Multer of Brooklyn, a ranking member of the House Banking and Currency Committee, all worked to improve and consolidate the Federal Credit Union Act. The result was H.R. 8305, which, among other amendments, authorized federal credit unions to cash checks for members.
In the 1960s, credit unions began undergoing a fundamental change. Increases in the number of credit unions diminished, while membership grew substantially. To better accommodate its member credit unions, the League concentrated on providing education, services and products. The resulting income created a need for a corporate structure. In 1961, NYSCUL, Inc. was formed to serve as a form supply depot, a print shop and a marketing outlet for CUNA Mutual. Later, NYSCUL, Inc. II was formed to provide data processing for credit unions. The two were eventually merged, and the League Marketing Group was formed. The data processing business was soon discontinued after disappointing results.
In 1963, President John F. Kennedy signed the Credit Union Bill into law, providing federal credit unions with greater operating flexibility.
In 1970, the National Credit Union Administration (NCUA) was established to charter and oversee federal credit unions. The National Credit Union Share Insurance Fund (NCUSIF) was also established to insure credit union deposits.
Beyond the U.S., credit unions were also experiencing rapid growth, and, as a result, the World Council of Credit Unions was created. Its purpose was to promote progress and continued unity in the worldwide credit union movement.
In June of 1971, the League held its 50th annual convention. At the event, the League announced an amendment to change the location of its principal office to Albany by the end of the year. The relocation was a strategic response to the growing membership and leadership of upstate credit unions, as well as the location of the state capital.
During that time, credit unions needing extra liquidity could only turn to other credit unions, with lending coordinated by the League's member support consultants. Fluctuating interest rates made coordination demanding for the League, and the board of directors soon determined that a central organization would be more efficient in meeting lending needs. At the time, a New York City credit union, Empire State Central Credit Union, was serving officers of other credit unions. The League decided to turn it into a credit union for credit unions with two distinct purposes: to pool excess funds in an investment format that would provide a liquidity vehicle for credit unions and to serve as a conduit between individual credit unions and the payment system.
Despite inflation, a recession and high interest rates, the credit union movement grew in the 1980s.
President Carter signed into law the Depository Institutions Deregulation and Monetary Control Act, which, among other things, allowed credit unions to offer checkable deposits. Credit unions began to depend heavily on the League, and in 1983, with expanded staff and increased services, the League relocated. The new building, constructed specifically for the League and its affiliates, came to be known as Credit Union Center.
In 1985, new League president Charles Whitney was elected, which resulted in more changes to the services of the League. Whitney set a very progressive agenda and focused on expanding the services offered to credit unions. To reflect this new direction, the League Marketing Group became CUC Services in 1986. Straight endorsements were rejected in favor of business partnerships, and business partners were chosen only from companies that provided services and products directly relating to the financial and operational aspects of credit union management.
Credit Union Center hosted a number of new organizations during the 1980s. In 1986, CUC Services developed a Card Services division to manage the credit card business of credit unions.
Another emerging credit union need was mortgage lending. Because CUNA Mortgage only dealt with large credit unions, nearly 90 percent of New York credit unions were unable to obtain mortgages. In 1987, the League combined funds with CUC Services and Empire Corporate to establish CUC Mortgage Corporation. The purpose of CUC Mortgage was to enable credit unions to participate in the mortgage market cost-effectively and competitively.
In the early 1990s, credit unions across the nation were facing constant banker attacks. They responded with Operation Grassroots, a campaign that culminated in a Washington, D.C. rally on February 28, 1991. More than 15,000 people, over 1,000 of which were New Yorkers, gathered to defend the credit union movement and amplify lobbying and publicity efforts.
Although Operation Grassroots was a success, it certainly did not signify an end to banker attacks. Bankers had already taken up another issue with credit unions that could be traced back to 1982, when the Federal Credit Union Act was amended "to allow NCUA to merge or to transfer some of the assets and liabilities of a credit union that was insolvent or in danger of insolvency to another federally insured credit union." In 1989, a small group of North Carolina banks joined with the American Bankers Association to sue the NCUA, claiming they had violated the 1934 law by allowing the AT&T Family Federal Credit Union of Winston-Salem to add members who did not work for AT&T.
The case was continually dismissed until 1996, when the U.S. Court of Appeals ruled in favor of bankers, forcing federally chartered credit unions to confine their membership to the original group around which they had been chartered.
Rallying once again, NCUA, CUNA and credit unions nationwide campaigned to gain a Supreme Court hearing regarding field of membership. Known as The Credit Union Campaign for Consumer Choice, the effort was successful. Credit unions scored their first national victory over banks on April 1, 1998, when the U.S. House of Representatives passed the Credit Union Membership Access Act (H.R. 1151) in a 411-to-8 vote. In July, the U.S. Senate passed H.R. 1151 by a 92-to-6 margin. A week later, President Bill Clinton signed the Act into law, ending a two-year struggle and authorizing federal credit unions to serve multiple groups with 3,000 or fewer employees.
During a time of exciting legislative progress, the League continued to grow. In 1992, a credit union ATM network was formed with the creation of CU24. CUC Services financed the project, which was managed by CSC, Inc., New York's agency for the national CU24 network.
The following year, League affiliate company New York State Shared Service Centers was founded to provide members with a national shared branching network.
In 1995, the League's Sidney Stahl Memorial Foundation was refocused and renamed as the New York Credit Union Foundation (NYCUF). The Foundation was tasked with advancing the ideals and goals of the credit union movement in New York State, with an emphasis on consumer financial education among young people.
In 1996, the League and its affiliates relocated to a new facility in Latham, NY.
In 2003, credit unions benefited from the passing of check-truncation legislation known as the Check Clearing for the 21st Century Act (H.R. 1474). The legislation simplified the process of clearing checks by transforming them into electronic format. Also in 2003, President George W. Bush signed into law the Fair and Accurate Transaction (FACT) Act, which included a number of provisions to curb the growing problem of identity theft.
After a nearly decade-long fight, credit unions succeeded in their push for bankruptcy reform, with President Bush signing reform legislation into law in April 2005.
In 2007, the League launched a statewide "Credit Unions for You" awareness campaign with a series of television spots and an interactive website. The League board of directors also focused extensively on developing a new identity for the League and, in May of 2008, announced the selected name: Credit Union Association of New York.
In June of 2008, the Association relocated to a nearby facility shared by Members United Corporate Federal Credit Union in order to realize more cost savings and deepen the partnership with Members United.
Though the Association's name and location have changed over the years, its mission has remained the same: advancing the credit union movement by advocating, educating, protecting and unifying the interests of all credit unions in New York State.
At the state level, the Association continues to advocate for the interests of New York credit unions. As a result of unified efforts, passage of Wild Card legislation for state-chartered credit unions was recently secured and a corporate tax bill introduced in the Senate was defeated. The Association continues to aggressively pursue credit union access to municipal deposits, the Excelsior Linked Deposit Program and the Banking Development District program.
The Association is also promoting legislation that will resolve the sub prime mortgage-lending crisis, reduce abusive credit card practices and establish fairness in the treatment of federally and state-chartered credit unions.
On a national level, the credit union movement also continues to pursue progressive legislation. In 2007, the Credit Union Regulatory Improvements Act (CURIA, H.R. 1537) was introduced. This updated version of a bill would modernize credit union capital and net worth standards, increase the business lending cap to 20 percent of total assets and make needed modifications to credit union activities, governance and oversight. Credit unions nationwide have deemed CURIA a priority and continue to pursue legislative support.
Credit unions are also pursuing Congressional support of a data security bill that would place more responsibility on the companies responsible for breaches, and CUNA is pushing Congress to pass legislation that would require major credit card companies to provide more information to credit unions and banks when a breach occurs.
While participating in national efforts, the Association also continues to serve the communities of New York. The New York Credit Union Foundation has expanded its financial literacy programs and offers several grants and scholarships. In 2007, the Foundation received the Hobart H. Conover Friend of Business Education Award for supporting business and marketing education in New York schools.
The Association's affiliates also continue to grow and thrive. Covera Card Solutions, which began as a Card Services division of CUC Services in 1986, provides credit unions in New York, New Jersey and Connecticut with credit, debit and ATM programs. Since its beginnings in 1987, CUC Mortgage has successfully serviced over $1 billion in mortgage loans for credit union clients. UsNet, formerly known as New York State Shared Service Centers, is an owner in CO-OP Shared Branching and currently sponsors more than 130 shared branching service centers in the state.
By providing credit unions in New York with advocacy, education and numerous resources, the Credit Union Association of New York has advanced the movement both statewide and nationally.
Today, more than 96 million Americans are members of credit unions. And as the credit union movement continues to evolve and expand, it is clear that our history is only the beginning.