Credit unions are not-for-profit,
member-owned, volunteer directed cooperative financial institutions; owned
and run by the people who use its services – credit union members, that
promote the economic well being of all people, including those of modest
means. Credit unions serve groups that share something in common, such as
where they work, live, or go to church.
Credit unions generally offer most financial services found at banks,
typically at better rates, due to credit unions' unique operation. While
banks must make profits for their shareholders, credit unions exist only to
serve their members. Credit unions return their profits, after expenses and
reserves, to members in the form of dividends on savings, low rates on
loans, and new or improved services.
Credit unions member deposits are insured up to $100,000 by NCUSIF, which is
administered by the National Credit Union Administration (NCUA), and meet
high standards of safety and soundness.
Philosophy and Structure: Credit unions are democratically owned and controlled institutions, based on “people helping people” principles. Members elect credit union boards of directors; each member has an equal vote, regardless of how much he or she has on deposit. Only members may serve as directors, and directors serve without remuneration. Volunteers are an important credit union resource. Presently, more than 119,500 Americans volunteer for their credit unions, serving as board members, committee members, or providing other assistance. Finally, credit unions have no outside stockholders, so after reserves are set aside, earnings are returned to members in the form of dividends on savings, lower loan rates, or additional services.
Safety and Soundness: Credit unions primarily engage in consumer loans and, to a lesser degree, residential real estate loans to their members. Due to prudent lending and management practices, credit unions were not adversely affected by the economic downturn of the late 1980’s and early 1990’s, and few are being adversely affected in the current economic downturn.
Insurance Fund:
Since 1984, credit unions have operated their own federal deposit
insurance fund on a pay-as-you-go basis. In that year, credit unions
voluntarily deposited one percent of their insured member savings in NCUSIF,
to bring its equity ratio up to 1.0 percent. This re-capitalization resulted
in a one-time reduction in the federal deficit. Each year, credit unions
deposit sufficient funds to ensure that the fund’s equity ratio is
maintained at or above 1.2 percent. While the NCUSIF is backed by the full
faith and credit of the U.S. Government, the structure of the insurance fund
ensures that only if all of the capital in the Credit Union Movement were
exhausted, would any taxpayer funds be spent on credit unions. Like other
deposit insurance funds, NCUSIF protects member deposits to $100,000. The
voluntary re-capitalization of NCUSIF before problems occurred, and the
mechanisms in place to keep the fund highly capitalized, illustrate credit
unions’ commitment to safety and soundness.
History of the Credit Union Movement
The credit union idea is a simple one: people should be able to pool their money and make loans to each other. It's an idea that evolved from cooperative activities in 19th century Europe.
Since that time, the idea's guiding principles have remained the same: (1) Only people who are credit union members should borrow there; (2) loans are made for "prudent and productive" purposes; (3) a person's desire to repay (character) is considered more important than the ability (income) to repay. Members are, after all, borrowing their own money and that of their friends. These principles still govern most of the world's credit unions.
As the 20th century began, the credit union idea surfaced in Canada. Canada's successful efforts profoundly influenced two Americans: Pierre Jay, the Massachusetts banking commissioner, and Edward A. Filene, a Boston merchant.
Below is a timeline of the evolution of credit unions in North America and around the world:
1900 First credit union in North America is founded at Levis, Quebec, by Alphonse Desjardins.
1907 Edward A. Filene, prominent Boston merchant, became interested in credit unions after seeing similar groups in India.
1909 First U.S. credit union formed by Desjardins in New Hampshire. First U.S. credit union law passed in Massachusetts with aid of Desjardins and Filene.
1921 Filene created the Credit Union National Extension Bureau and hired Massachusetts attorney Roy F. Bergengren to help him. Filene poured more than $1 million of his own money into the project. Bergengren appeared before state legislators, helping pass laws and initiating volunteer organizers into the "movement."
1934 President Franklin D. Roosevelt signs the Federal Credit Union Act. The Credit Union National Association (CUNA) is formed as a non-profit, self-supporting organization of credit unions, with Bergengren as first managing director.
1935 CUNA Mutual Insurance Society is formed for protection of credit unions and their members.
1937 The Federal Credit Union Act is amended to assure tax exempt status for credit unions.
1958 CUNA becomes a worldwide association open to credit union leagues all over the world.
1970 CUNA International’s name is changed to the Credit Union National Association, Inc., and the World Council of Credit Unions is created. The Federal Credit Union Act is amended creating the National Credit Union Administration, an independent agency.
1996 The U.S. Court of Appeals for the District of Columbia rules that NCUA’s multiple-group policy is unlawful because, the Court said, the Federal Credit Union Act requires FCUs to have a single common bond.
1997 The Credit Union Membership Act is introduced in Congress. The legislation seeks to amend the Federal Credit Union Act by clarifying NCUA’s long-standing policy regarding the field of membership of federally-chartered credit unions.
1998 Congress overwhelmingly passes the Credit Union Membership Access Act. H.R. 1151 says credit unions, with regulator approval, may enroll members from outside their original membership groups, preserving consumers’ rights to belong to a credit union.
2003 The credit union movement is one of the strongest financial networks in the world. Through cooperative efforts, credit unions of all sizes are able to offer their members a broad range of services to meet their financial needs.
The credit union difference is evident every day in the service credit unions provide to their members, in the focus and direction as set by the board of directors, and in the credit unions’ commitment to community service.
Here is a look at the many other differences between not-for-profit financial institutions and the typical banking organization:
Key Differences Between Credit Unions and Banks
Congress exempted credit unions from paying income taxes because of their structure and purpose. Comparisons are often made between the tax treatment of banks, which do pay corporate income taxes, and credit unions. However, there are fundamental differences between banks and credit unions that justify this disparate treatment.
The basic reason that banks, like any for-profit corporation, are taxed on their income is because they have the option and ability to retain income at the corporate level. Cooperatives, like credit unions, typically do not pay income tax because they must pay all their income to their members. Credit unions, after transferring a portion of their income to reserves and loss accounts, must return
all surplus earnings to the members as dividends, lower loan rates, and higher savings returns. Since credit unions cannot retain income at the corporate level, but instead pay distributions to members who are taxed, it makes just as much sense today as it did in 1934 to not impose a corporate income tax on credit unions.
It is important to remember that credit unions do pay taxes. Credit Unions’ federal tax exemption only covers corporate income tax. Credit unions pay all personal and real property taxes, employment taxes, and sales taxes where applied. Our corporate profits are paid back to the members, as owners of the credit union, as dividends based on their share holdings or deposits.
Myth #1: “Credit unions are tax-exempt.”
Credit unions pay the same share of federal, state, and local taxes as any business, including real and personal property tax and employment taxes. The exemption only applies to corporate income tax, which, as explained above, makes sense since all income passes through to the credit union’s members.
Myth #2: “Tax-exempt status gives credit unions an unfair advantage.”
Any credit union’s lower loan rates and higher savings returns come from their structure and mission, rather than special tax treatment. Credit unions exist to provide financial services to their members, not to provide a return for a few shareholders’ investments. Dedication and service to the needs of members, rather than to the investment return of shareholders, is what gives credit unions their competitive edge.
Myth #3: “Credit unions no longer fulfill the mission for which Congress created them, so they should lose their exemption.”
Credit unions were created in 1934 to serve the financial needs of America’s consumers in a cooperative manner that would focus upon service to the member, not profit for the few. Congress reaffirmed this in 1998. Some credit unions have been so successful within this structure that they can provide their members full financial services, while the vast majority still identify their members’ greatest needs and try to meet only those. However, every credit union, large or small, still operates within the same structure reaffirmed by Congress in 1998: not-for-profit, but for service.
The
credit union idea is a simple one: people should be able to pool their money and
make loans to each other. It's an idea that evolved from cooperative activities
in 19th century Europe.
Since that time, the idea's guiding principles have remained the same: (1) Only
people who are credit union members should borrow there; (2) loans are made for
"prudent and productive" purposes; (3) a person's desire to repay (character) is
considered more important than the ability (income) to repay. Members are, after
all, borrowing their own money and that of their friends. These principles still
govern most of the world's credit unions.
As the 20th century began, the credit union idea surfaced in Canada. Canada's
successful efforts profoundly influenced two Americans: Pierre Jay, the
Massachusetts banking commissioner, and Edward A. Filene, a Boston merchant.
Below is a timeline of the evolution of credit unions in North America and
around the world:
1900 First credit union in North America is founded at Levis, Quebec, by
Alphonse Desjardins.
1907 Edward A. Filene, prominent Boston merchant, became interested in
credit unions after seeing similar groups in India.
1909 First U.S. credit union formed by Desjardins in New Hampshire. First
U.S. credit union law passed in Massachusetts with aid of Desjardins and Filene.
1921 Filene created the Credit Union National Extension Bureau and hired
Massachusetts attorney Roy F. Bergengren to help him. Filene poured more than $1
million of his own money into the project. Bergengren appeared before state
legislators, helping pass laws and initiating volunteer organizers into the
"movement."
1934 President Franklin D. Roosevelt signs the Federal Credit Union Act.
The Credit Union National Association (CUNA) is formed as a non-profit,
self-supporting organization of credit unions, with Bergengren as first managing
director.
1935 CUNA Mutual Insurance Society is formed for protection of credit
unions and their members.
1937 The Federal Credit Union Act is amended to assure tax exempt status
for credit unions.
1958 CUNA becomes a worldwide association open to credit union leagues
all over the world.
1970 CUNA International’s name is changed to the Credit Union National
Association, Inc., and the World Council of Credit Unions is created. The
Federal Credit Union Act is amended creating the National Credit Union
Administration, an independent agency.
1996 The U.S. Court of Appeals for the District of Columbia rules that
NCUA’s multiple-group policy is unlawful because, the Court said, the Federal
Credit Union Act requires FCUs to have a single common bond.
1997 The Credit Union Membership Act is introduced in Congress. The
legislation seeks to amend the Federal Credit Union Act by clarifying NCUA’s
long-standing policy regarding the field of membership of federally-chartered
credit unions.
1998 Congress overwhelmingly passes the Credit Union Membership Access
Act. H.R. 1151 says credit unions, with regulator approval, may enroll members
from outside their original membership groups, preserving consumers’ rights to
belong to a credit union.
2003 The credit union movement is one of the strongest financial networks
in the world. Through cooperative efforts, credit unions of all sizes are able
to offer their members a broad range of services to meet their financial needs.
What is the Louisiana Credit Union League?
The Louisiana Credit Union League (LCUL) is a nonprofit, professional trade
association representing Louisiana’s state and federally-chartered credit
unions.
How long has LCUL been around?
LCUL was formed in 1934, to represent the interests of credit unions and
credit union members throughout the state.
Who does LCUL serve?
LCUL directly serves more than 273 credit unions throughout Louisiana and
indirectly Louisiana’s more than one million credit union members.
Who manages LCUL?
A 20-member Board of Directors, made up of credit union volunteers and
professionals from the LCUL membership, guides LCUL and its various activities.
What Does LCUL Offer Its Members?
The Louisiana Credit Union League provides member credit unions with education
and training opportunities, governmental affairs and advocacy on the state and
national level, products and services to help credit unions thrive in our
ever-changing environment, compliance information and much more.
Communication
Information is essential to successful operations, and the LCUL is committed to
providing Louisiana credit unions with a wealth of information that is both
timely and useful. As a representative for Louisiana credit unions, the LCUL
strives to develop positive media coverage for the credit union movement, and
addresses issues that affect credit unions and transmits it to members
electronically, via fax and through the mail.
League publications include:
· eNews - a weekly electronic newsletter,
· Information Releases - which are faxed to members weekly,
· Fleur de Lis - a quarterly news magazine, and the
· Annual Credit Union Planning & Resource Guide.
Education & Training
As credit unions strive to be their members' primary financial institution and
offer services that meet their unique needs, LCUL is pleased to offer education
and training programs specifically designed to help them achieve that goal.
Through a variety of conferences, seminars, workshops, on-site trainings and
technology-based educational opportunities, LCUL provides credit unions with the
information they need to help them thrive.
Governmental Affairs
The LCUL guards credit union rights at the state and national level. As
financial laws and regulations are changed or are challenged, LCUL is there,
protecting the interests of credit unions and fighting for or against issues
that members say are important to the vitality of the industry.
Products & Services
To help credit unions lead and manage in an ever-changing environment, LCUL
member services consultants serves as a day-to-day link between the League and
member credit unions.
Some of the products and services that the League offers include:
ATM machines,
ATM processing,
Credit and debit cards,
Credit cards,
Customized surveys,
Human resources consultations,
Strategic planning sessions,
Technology solutions,
Volunteer Training, and much more
Compliance
Because laws and regulations that affect credit unions are constantly changing,
the League provides information on a variety of compliance, regulatory,
technical and operational issues. This advice and direction is provided to
member credit unions through the Compliance Beacon newsletter and informational
bulletins and releases on technical matters in our Compliance Communiqué, and
booklets on specific topics. The League can also answer specific questions in
these areas.
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824 Elmwood Park Blvd., Suite 200 Harahan, LA 70123 -(800) 452-7221 |
