Credit unions in the United States
[3] The clients of the credit unions become partners of the financial institution and their presence focuses in certain neighborhoods because they center their services in one specific community.
[8] Due to their small size and limited exposure to mortgage securitizations, credit unions weathered the 2007–2008 financial crisis reasonably well.
Pierre Jay, a central banker and Edward Filene, a Bostonian merchant and philanthropist, were instrumental in establishing enabling legislation in Massachusetts in 1908.
Filene's philanthropy, combined with the practical implementation efforts of his associate Roy Bergengren were critical to the emergence of credit unions across the United States.
In addition to the traditional information and enforcement advantages resulting from the fact that members shared the same workplace, the employer-based bond permitted credit unions to use future paychecks as collateral.
"[20] A 1982 Interpretive Ruling and Policy Statement (IRPS) 82-4[21] allowed many credit unions to grow their memberships and expand into multiple states.
[25] As of 2003, U.S. governmental regulatory agencies require that credit unions restrict their membership to defined segments of the population, such as people who live, work, worship, or attend school in a well-defined geographic area; employees of specific companies or trades; members of specific non-profit groups, including labor unions, alumni associations, conservation or other advocacy organizations, lodges, churches, or the like; or a particular occupational group, such as teachers, doctors, etc.
To qualify for LICU status, the majority of the credit union's members must be considered "low-income" based on specific requirements set by the NCUA.
[33] Credit unions are exempt from the Community Reinvestment Act, a U.S. federal law that encourages banks to provide services in low- and moderate-income areas.
[42] In order for credit unions (and banks) to maintain capital reserves and stay solvent, their revenues (from loans and investments) must meet or exceed their operating expenses and dividends (interest paid on deposits).
A credit union's policies governing interest rates and other matters are set by a volunteer Board of Directors elected by and from the membership itself.
Participating in a CUSO allows credit unions to provide additional services to customers such as business and commercial real estate lending.
[citation needed] The required minimum deposit to join a credit union is called a share and establishes the depositor as a member with full ownership rights.
[citation needed] Tension has always existed between member-owned cooperative credit unions and for-profit banks in the United States.
[citation needed] Bank holding companies and their affiliates aggressively compete to provide services to credit unions through their ATMs networks, corporate checking accounts, and certificate of deposit programs.
In 2007, the American Bankers Association (ABA) barred credit union employees from attending ABA-sponsored educational seminars.
[52] CU Financial, a consulting firm that helps credit union management execute these conversions, has explained in marketing materials that if a credit union with $50 million in capital converts to a stock bank, under certain conditions a payoff in the "$1.2 million range for each director is not out of the question," while executives might also expect additional stock compensation that "could lead to a $10 million-plus ownership stake for a capable CEO".
They point out that while insiders have made windfall profits, most members have lost their ownership stake without compensation, and face worse rates and fees after the conversion.
[54] Comparisons of interest rates show that credit unions that have converted to banks now charge their members more for loans, and pay less for savings.
The National Center for Member Trust is a consumer protection non-profit organization "formed to support the member-owners of credit unions that are trying to convert to banks.
