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The origin and development of credit unions

Cooperatives are voluntary, self-governed associations of people that work together for a common goal. The first cooperative was founded in 1844 by a group of workers in Rochdale, England. The Rochdale Society of Equitable Pioneers, as the group was known, pooled a pound from each member to open a cooperative store that sold butter, sugar, flour, oatmeal and candles.

History of credit unions

The cooperative movement evolved into the idea of pooling member money to offer credit to individuals. The first official credit unions were founded in Germany in 1849 to save poor urban workers from resorting to loan sharks for financial help. In North America, the first successful credit unions were founded in Canada at the turn of the 20th century.

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America's first credit union opened in Manchester, N. Jay and Filene fought for legislation legalizing credit unions at the state level. Beginning with Massachusetts, they established credit union laws in 15 states by 1925. Credit unions took on a new significance during the Great Depression. In 1934, President Franklin D. Roosevelt signed the Federal Credit Union Act into law.

The law established a nationwide credit union system, overseen by the federal government, to help citizens with small incomes get credit for "provident purposes. But by 1969, there were 23,876 [source: Due to consolidation and mergers, there are currently around 8,500 credit unions in the United States. In 1970, the U. The NCUA enforces operating rules on all federally chartered credit unions.

History of Credit Unions

The NCUA sets a cap on credit union interest rates for certain loans, but does not set specific interest rates -- that's up to individual credit unions. Today, the WCCU has member credit unions in 97 countries, where it helps support 46,000 local credit unions through development and training [source: Next, we'll look at the differences between two of the most common credit unions and where, exactly, you fit in. Many of the larger credit unions offer the same services as banks.

How Credit Unions Work

Because credit unions don't pay taxes, they can offer their loans at lower interest rates than banks -- which makes for some angry bankers. The banking industry argues that many credit unions should be taxed as for-profit institutions. The Massachusetts Bankers Association has been an especially active advocate for this movement. The association argues that credit unions should be taxed as a for-profit company -- and observes that some of them aren't giving their profits back to members [source: