What's a Credit Union

History of the Credit Union Industry

The first credit union was established in 1850 in Germany and was called the "Peoples' Bank." Members deposited their savings to provide working capital. From the deposits, loans were granted for "productive purposes" based on the character of the borrower. By 1859, just nine years after this first cooperative was formed, there were 183 Peoples' Banks and 18,000 members in two German provinces.

The concept of credit unions quickly spread throughout Europe, then to North America in 1900. The first credit union in North America, the la Caisse Populaire di Levis (The People's Bank of Levis), was organized by Alphonse Desjardins in 1901 in Quebec, Canada. The first credit union in the United States, St. Mary's Bank, was opened on April 6, 1909, in New Hampshire and is still in operation. Although credit union growth in the United States was initially very slow, the 1920's saw a change in the economy, with more people able to afford consumer durables (cars, washing machines, etc.). Banks and savings & loans were not interested in assisting the small saver or borrower, thus making credit unions very popular.

In June 1934, President Franklin D. Roosevelt signed the Federal Credit Union Act into law. This was the single most important step in advancing the credit union movement nationwide. It is interesting to note that during the Great Depression, not one credit union closed, while many other financial institutions were closing their doors.

Credit unions are based on the cooperative idea that more can be accomplished by working together than by working individually and that is the basis for the credit union philosophy of "People Helping People." Some of the differences between a credit union and other financial institutions are:

• In credit unions, the members are the owners and share a common bond of association called a field of membership. Heritage Community Credit Union has a community charter with the common bond inclusive of individuals who live, work, worship, or attend school in Sacramento or Placer Counties.
• While profit margins are important for economic viability, credit unions place their focus on service. Our cooperative structure, member ownership, volunteerism, and exceptional, caring and honest service distinguish us from other financial institutions.
• Credit Unions are democratic, member-owned cooperatives; members have the power to direct policy through their Board of Directors. If the majority of members are dissatisfied with the directors who set the policies of the credit union, they have the OUR CREDIT UNION 1-2 power to replace them. Board elections are based on a one member, one vote structure. In a credit union each member has one vote regardless of the size of their deposits. This structure is in contrast to for-profit, public companies where stockholders vote according to the number of shares of stock they own.