Since the financial crisis, Americans have acquired a newfound appreciation for the intimacy and personal touch offered by credit unions as opposed to oftentimes massive and impersonal banks. But the history of credit unions in the United States dates back much further, to the founding of St. Mary's Bank in 1908.
The emergence of credit unions
Many people nowadays take access to credit for granted. Assuming you have adequate income and a respectable credit score, it's relatively easy to get a loan for any number of things. People borrow to buy cars and homes. They get home equity lines of credit to update their kitchens and bathrooms. And all but a small minority of adults have credit cards, which are nothing more than easily accessible revolving lines of credit.
But consumer credit -- versus commercial credit -- is a relatively recent phenomenon. Prior to the 1920s, in particular, it was all but impossible for a person to get a loan from a bank, which either viewed individuals as non-creditworthy or, due to state usury laws then in existence, couldn't charge a sufficiently high interest rate on consumer loans to offset the perceived risk. According to the seminal book on Citigroup's history:
The problem was serious in the 1920s because the large demand for personal credit was not being met. Commercial banks did not make small, unsecured loans. The few so-called licensed lenders and industrial banks, which were allowed to charge rates above [state usury laws] on unsecured personal loans, could not expand rapidly enough to meet the need, because their capital base was too small and their loan portfolios too undiversified.
It was in this void that credit unions began to flourish in the United States. This isn't to say credit unions are an American invention. As the National Credit Union Association explains in its brief history of credit unions, the earliest financial cooperatives date to the beginning of 1800s in England. They then gathered momentum a few decades later after taking root in Germany.
Credit unions come to America
Although credit unions had been in existence for over a century, it wasn't until the beginning of the 20th century that the concept crossed the Atlantic Ocean. The first such institution in North America was the Caisse Populaire de Levis. Founded in 1900 in Quebec, Canada, by Alphonse Desjardins, its purpose was to provide affordable credit to working-class families that would otherwise have to turn to usurious loan sharks to acquire financing.
Nearly a decade later, as recounted by the NCUA, Desjardins helped a group of Franco-American Catholics in Manchester, N.H., organize St. Mary's Cooperative Credit Association -- today's St. Mary's Bank. As the company's website explains:
St. Mary's Bank made it possible for Manchester's immigrants to achieve the better quality of life they had envisioned. For just $5, the price of one share of capital stock, anyone in the community could become a member. Savings were accepted from workers, families, and children. The accumulated savings were, in turn, lent to members to purchase and build homes, establish neighborhood businesses, and meet the personal financial needs of the community.
Fast-forward to today, and St. Mary's is now a sizable institution that provides credit to its 91,989 members. With $855 million in assets, it offers a wide variety of loans -- from car loans, to mortgages, to small business loans, among other things -- and financial services to businesses and consumers. To become a member, all it takes is the purchase of one share of capital stock for a mere $5.