When Joseph Boivin opened his home to the French Canadian factory workers of Manchester, N.H., he had no way of knowing that, 100 years later, he would be remembered as one of the architects instrumental in building of the American credit union. It was 1908, and Boivin, a lawyer by trade, was living with his wife and three children on the ground floor of a three-story house. Manchester’s French Canadian community was growing rapidly, and Monsignor Pierre Hevey of St. Mary’s Parish saw quickly that his community was being underserved. A request to Canadian credit union pioneer Alphonse Desjardins put in motion what would become the cooperative banking movement of America.
What began in earnest as a path to financial independence for that immigrant community has grown today to include nearly 87 million people.
For those 87 million members across the world, the mission of credit unions today remains much the same as it was 100 years ago. They aim to meet the financial needs of the communities they serve, promoting good saving habits along the way. This provides a stark contrast to the big-name, for-profit lenders who have been in competition with credit unions for years.
Roy Campana of Industrial Credit Union based in Boston finds that "credit unions are set apart because they are so people focused."
"I do think people feel good about the fact they can talk to our workers about the safety or soundness or any aspect of our credit union’s operation," he says. "We don’t use voicemail, so they will always be able to get in touch with real people. We do have ATMs, online banking, debit cards; we can be virtual, so people who use us around the world."
Campana, whose family is replete with prominent players in the movement, says that despite taking a back seat to national banks, the value of credit unions cannot be underestimated. "They want to offer the best rates and they are willing to participate in the community in one way or another. … These are the names and the faces they see every day. People want to sit down and talk to someone they know they can see again."
Even from the start, this focus on people was a big draw for credit unions. When St. Mary’s first started in New Hampshire, there was a $5 fee to join. At a time when people earned maybe $2 per week, the price was steep – it would be nearly $200 at today’s inflation rate – but members were willing to make the investment, Powell says. Many would make payments of just a few cents a week until they reached their $5 goal to join.
Industrial, chartered just two years after St. Mary’s, is also a product of people-driven banking. Founded by the Women’s Educational and Industrial Union, the credit union was formed in response to a growing need from the community. The union was also responsible for a great deal of successful programs serving members, such as hot lunches workforce training programs for women.
At Industrial, Campana’s great uncle, Joseph Campana, held the post of director. An early champion of the movement, Joseph Campana worked tirelessly alongside Edward Filene and Roy Bergengrin to promote credit unions. He attended the famed Estes Park Convention in Colorado in 1934, and was a founding member of CUNA. Joseph Campana brought nephew John in to take the helm of Industrial, and John, in turn, turned to his son, Roy. This connection to the credit union has fostered in Roy Campana a deep appreciation for what the institutions do for members.
"I was here during school vacations," Roy Campana recalls, "doing things like running mail errands, acting as a bookkeeper, repossessing automobiles, foreclosing homes, working as a teller. I have been here for 35 years now. It wasn’t really my goal, I stumbled into, but I have found credit unions do wonderful things for people. They have a lot of value, and they bring a lot to community."
The museum also houses numerous examples of credit unions’ people-centric ideals.
"Credit Unions were set up where ever people had the space," Powell notes. The founders, often everyday people organizing the institutions out of need and a desire to better their communities, would get a safe and record keeping material and open shop where they could. Sometimes that was a barn or a living room, and in one case, an aircraft hangar. During World War II, one soldier set up a credit union for his fellow troops in Pearl Harbor. On December 7, 1947, when the Japanese attacked the base, the hangar where the credit union was set up was in the line of fire. The soldier gave his life trying to retrieve the money and records, and keep the credit union going.
Community Center
The role of a credit union goes beyond simply wanting to serve individual’s financial needs. As institutions designed to serve specific pools of members, credit unions become a sort of built-in community center.
"Credit unions, community banks and thrifts have a really important place in community," says Campana. For his employees, that participation ranges from volunteering at the Red Cross and church functions to serving on municipal boards and working with a range of social service agencies. This community presence is a vital part to the credit union model, as it puts the focus on the member and not the money.
The link to a particular community has become even more important as the competition for new customers grows. At times that has meant redefining the community itself. Rhode Island’s Navigant Credit Union, formerly Credit Union Central Falls, recently went through a name change to help broaden awareness of who it served.
"The history of credit unions is that they were associated with a specific field of membership," says Navigant’s Tim Draper. "As they expand, names have to change to represent new identities, new brands. It’s the way the industry is going."
The 93-year-old institution, founded in 1915, was incorporated as part of the Notre Dame Parish in Central Falls, R.I. What had begun a few years earlier as a church-based savings society, was able to grow thanks to the law changes in 1914 that paved the way for the spread of credit unions. The recent name change, Draper says, was just another move to adapt to a changing community.
"The name is a little more representative of who we had become as a regional credit union," says Draper, vice president of marketing at Navigant. "The changing of the name helped reflect where we were going in the future."
The adjustments credit unions have made to the ever-changing communities they serve is highlighted by the unwavering dedication they have to them.
"The philosophy hasn’t changed," says David Surface, president and CEO of St. Jean’s Credit Union in Lynn, "helping those in need. That doesn’t mean that will not make a $350,000 loan for a home or commercial building to our members, but the philosophy hasn’t changed. We make auto, personal, vacation and fuel loans." The focus is still on extending products and services to those of modest means, the products have just become modernized and "the numbers have grown as a result of helping our members."
St. Jean’s, the oldest credit union still in existence in Massachusetts, has been serving the underserved in their community since being chartered in 1910. Starting out with a capital of $85, the credit union was organized by Father Jean-Baptiste Parent with the help of Desjardins. Today, St. Jean’s has nearly $120 million in assets and 17,000 members, with headquarters in Lynn, and branches in Salem, Revere and Newburyport.
The growth of credit unions such as St. Jean’s and Navigant is indicative of the role community involvement plays. Members have seen the benefits of cooperative banking in a way that banks cannot provide. With the pace of life getting increasingly faster, the demand of one place to handle all financial needs, where the staff are knowledgeable and friendly has giving credit unions a clear edge.
"We fill a gap," Draper says. "It’s become painfully evident for many people in the country that these big institutions are not concerned about the little guy, whereas I think that credit unions provide that community-based cooperative for somebody to do business." Credit unions are the institution of choice for someone who thinks, "‘I want to put my money to invest back in where I live, where I work, where I play.’"
The same holds true for the small business owner who wants one place to deal with. By making it easier to work with them, and by offering the same services big banks can provide, credit unions are positioning themselves to become big players in the business sector.
"There’s a saying that we look for time and treasure," Draper says. "Giving time is as important as sponsoring a little league team, so our staff dedicates a lot time out in the community. ..We need to position ourselves to show we have vested interest."
A Light in the Dark
And never has that vested interest been more relevant than now. With a volatile economy and an unsteady housing market, the needs of members are exacerbated by growing fears that their money is safe.
"The Depression is closer to reality than ever before," Powell notes. With bailouts and buyouts making front page news nearly every day, the resilience of credit unions may be one of their biggest assets. "When credit unions went through the Depression, none of them failed, while 3000 banks did. When we came out of the Depression, more credit unions had been organized than when it had started."
Of course, a lot has changed since then, and credit unions are not immune to the challenges that a down economy presents. And while credit unions and community banks did not get caught up in the sub-prime mortgage mania that many of their counter parts did, even the process of giving loans has changed.
"I can remember writing loans to people who basically qualified because their character was such that they would pay back no matter what," Campana recalls. "People would just sort of put their nose to grindstone. Reputation was very important to them." Character lending has seen a sharp decrease since the 1970s, and, Campana says, has been cast aside in favor of the FICO score.
"Because things are changing hourly, we are trying to reassure the public," Campana says. "I do think when the dust settles, the credit union industry will be very successful."
Contending with burdensome regulations and constant changes in banking laws has also been as much of a challenge for credit unions as it has for banks. Many credit unions note that adhering to regulations designed to keep large institutions in check has gotten in the way of fulfilling their own mission at times.
Surface has noted the changes at St. Jean’s. "A challenge for us is the required amount of training and expertise needed to deal with ever changing regulations," he says. "It’s difficult for the smaller credit unions with limited resources to stay ahead of regulatory issues."
While this provides an excellent opportunity for Industrial’s employees to be educated and able to speak to customers more intelligently, dealing with onerous regulatory requirements can mean less time to deal with customers. "It gets in the way of consumer lending, as it is tough to keep hands around [regulations] and to help people."
Navigant’s Draper agrees. "It’s a different world," he says. Looking back even a few years ago, at the height of the housing bubble, he recalls thinking "‘Wow this is great, but at some point things will change.’" With the time of change now upon us, Draper sees a unique opportunity for credit unions to further distance themselves from banks and positions themselves as worthy competitors.
"The challenges for us are going to be to swim our way out of those financial institutions’ mess, and differentiate ourselves," he says. "We are in a better position, for most part we are not tangled up in complex elements that have come crashing down."
With the right strategy, credit unions are primed to reach a growing pool of concerned about the solvency of the institutions they are with, and put the spotlight on small, community banks and credit unions.
"There are opportunities for homegrown institutions to thrive."
Meghan Healy is associate custom publications editor at The Warren Group, publisher of CenterPoint.
