A brief timeline of events in the 100-year history of credit unions.
1909 – The first credit union in the United States is formed in New Hampshire. Massachusetts passes the first state credit union law.
1934 – The Federal Credit Union Act becomes law, creating the federal credit union charter.
1937 – An amendment to the Federal Credit Union Act creates a special tax exemption for federal credit unions.
1951 – The tax-exempt status of S&Ls and mutual savings banks is revoked by Congress. According to Senate Report No. 781: “Mutual savings banks are in active competition with commercial banks and life insurance companies for the public savings, and they compete with many types of taxable institutions in the security and real estate markets… continuance of the tax-free treatment now accorded mutual savings banks would be discriminatory.”
1968 – Federal credit unions are authorized to issue secured loans with maturities of 10 years; unsecured loan limit is increased to $2,500.
1970 – The National Credit Union Administration (NCUA) is established to regulate federal credit unions and federal deposit insurance is extended to credit unions via the National Credit Union Share Insurance Fund.
1977 – Amendments to the Federal Credit Union Act expand savings, lending, and investment powers. For example, amendments allow 30-year residential mortgage loans, 15-year mobile home loans and home-improvement loans.
1980 – The Depository Institutions Deregulation and Monetary Control Act authorizes credit unions to offer share draft (i.e., checking) accounts.
1982 – The passage of the Garn-St Germain Depository Institutions Act broadens mortgage loan authorities for credit unions. National Credit Union Administration expands the definition of “common bond” to include multiple employer groups.
1983 – The May 23, 1983, edition of Washington Financial Reports publishes a story on The Grace Commission report about cost control: “Credit unions are no longer a unique breed of financial institution”, the task force said and should no longer be exempt from taxes. Credit unions now function like other financial institutions and compete directly with banks and S&Ls, according to the task force.
1984 – NCUA broadens credit union investment authorities by allowing them to invest in Eurodollars, bankers’ acceptances, cash forward agreements, and reverse repurchase transactions. Loan limits, documentation, and maturity are no longer regulated by the NCUA, but instead are to be developed by the individual credit union. NCUA enlarges the “field of membership” definition to allow retirees to band together and form a credit union. Though the NCUA says senior citizens’ groups may be formed with the primary purpose of obtaining service from a credit union, the courts later strike this down saying a common bond is necessary.
1989 – NCUA extends the maturity limit for loans from 15 to 20 years. Credit unions can now offer 20-year loans for mobile homes, second mortgages, and home improvement.
1994 – NCUA revises field of membership rules to allow federal credit unions to add occupational groups of up to 100 persons without NCUA’s specific approval.
1997 – “Member business loans,” defined as “any loan, line of credit or letter of credit, the proceeds of which will be used for a commercial, corporate, business, investment property or venture, or agricultural purpose, “reach $2.9 billion in outstandings. In some cases, more than 30 percent of credit unions’ assets are devoted to commercial loans. NCUA proposes raising the hurdles for credit unions wishing to convert to mutual savings banks, even though many believe that switching to a different type of cooperative charter would better accommodate their members’ needs.
1998 – The Supreme Court rules that NCUA broke the law when it allowed occupational credit unions to include multiple unrelated groups in their fields of membership. Although the Justices split 5-4 on whether banks had “standing” to sue the NCUA over its policy, the decision on the merits of the case was unanimous. Congress considers various proposals to loosen credit union membership rules while limiting burdens on U.S. taxpayers. Congress passes H.R.1151, The Credit Union Membership Access Act, which authorizes credit unions to serve multiple common bond groups. The bill does, however, contain some restrictions on credit unions, including business lending limits and a requirement that community CUs be local. Bill also subjects credit unions to “Prompt Corrective Action” for the first time. NCUA implements their new field of membership rule Interpretive Ruling and Policy Statement 99-1, disregarding legislative intent. The rules promulgated disregarded statutory language regarding the “local” nature of credit unions and guidelines regarding an immediate family member or roommate’s eligibility for membership. The rule also defines a “local” area as a single county with fewer than 300,000 persons or multiple contiguous counties with fewer than 200,000 persons.
2001 – The “Access Across America” initiative is unveiled by NCUA. Chairman Dennis Dollar stated that the initiative’s purpose was to: … facilitate credit unions as they seek to reach out and provide lower-cost financial services to as many Americans as possible.
2003 – The Small Business Administration expands the use of the guaranteed loan program, opening its eligibility rules to allow partnerships with all credit unions. Loans guaranteed by the federal government do not count against the aggregate business lending cap. An amendment to the member business loan rule is made by the NCUA board. It allows flexibility in determining loan amounts counted against the cap. The board also acts to permit Credit Union Service Organizations to originate business loans and relaxing risk-weighting standards. The first in a series of member business lending workshops is convened by NCUA. These workshops are directed at facilitating the involvement of new credit unions into business lending. See Press Release.
2004 – The NCUA approves the community charter for “LA Financial.” Its new charter includes 9,637,494 potential members making it the largest single community charter approved to date. The approved “local community” includes a population larger than 42 states and the geographic area exceeds the combined square miles of Rhode Island and Delaware. 2005 – ABA announces two lawsuits against NCUA. The first lawsuit challenges NCUA’s approval of “underserved” expansions for community chartered credit unions. The second suit alleges that NCUA approved a community charter in Pennsylvania that is not “local and well-defined” as necessitated by statute.
