The Birth of Cooperative Banking
The rich history of the credit union dates back to 1849, when Frederich Raiffeisen pioneered the concept of a rural credit society in Southern Germany.
Modern central banking was initially reserved for the wealthy – those who had both money to hold and money to repay. For the socio-economically inferior, banking was less likely. In 1864, Raiffeisen established the first ever cooperative lending institution, thus the first effective credit union. The purpose of the credit union was to create a way to help the un-served and under-served, such as farmers or other non-wealthy locals, to enjoy the same necessary benefits from banking. Financial reputations were no longer the only criteria. Most credit union members were accepted based on additional factors, such as maintaining a good reputation within, or providing a service for, the community.
Credit Unions in North America
By 1900, word had spread all the way to Quebec, Canada, where Alphonse Desjardins founded the first cooperative financial institution in North America. Shortly thereafter, the concept was adopted by Pierre Jay, the Finance Commissioner of one of America's great pioneer states: Massachusetts.
Once in America, credit unions gained rapid popularity due to vast rural lands and incredible agriculture. By June of 1934 US President Franklin D. Roosevelt signed the Federal Credit Union Act (FCU Act), which authorized federally chartered credit unions in all US states. Credit unions were supervised by the Federal Deposit Insurance Corporation (FDIC) until 1970 when the National Credit Union Association (NCUA) was formed. This same year, assets in credit unions tripled.
In 1998 US President Bill Clinton signed the Credit Union Membership Act to restore membership flexibility for credit unions, and in July of 2010, US President Barack Obama signed the Dodd-Frank Act, in part amending the FCU Act to allow a standard maximum share insurance amount of $250,000. This amount was thus far only enjoyed by banks insured by the FDIC.