Why is an organization such as the Credit Union National Association important to the credit union industry?

Like the rest of the United States, mostly rural Meigs County, Tennessee, had suffered during the recent financial crisis and the recession that followed. As the three largest employers in the county heard many times, it was a bad year to try to start a credit union. But the Middle Tennessee Federal Credit Union, now worth $3 million, recently celebrated its first birthday. 

The founders of the credit union, originally named the Mid East Tennessee Community Credit Union, had begun seeking a charter before the economic trouble. Their employees were resorting to predatory, high-interest payday loans to meet their financial needs, and the founders wanted to help them get small, short-term loans on more reasonable terms. The credit union opened for business in the midst of the recession. Jim Pitt, the chairman of the credit union’s board and the CEO of Polyform Plastics, says, “Mostly I am proudest of our loans for the first year."

Whereas a bank is a for-profit institution beholden to its board members and shareholders, a credit union is a nonprofit cooperative owned by its members. Credit unions emphasize the basic finances of everyday life: savings and checking accounts, credit cards, and relatively small loans for homes or cars. Credit unions generally pay more interest on savings accounts and charge less interest on loans. Mark Wolff of the Credit Union National Association (CUNA) says, “The credit union channels any excess funds back to its members.” Just as the FDIC does for banks, the federal government’s National Credit Union Administration insures deposits of up to $250,000.

Credit unions are chartered to serve particular groups. Originally, most were affiliated with employers. For example, BECU (formerly the Boeing Employees’ Credit Union) in Seattle once accepted only employees and their families. About ten years ago, credit unions began to ease their membership requirements. To join the Middle Tennessee Federal Credit Union, a person must simply either work, worship, live, or go to school in the local area.

With the big banks pulling or tightening consumer credit, consumers have had trouble getting even the most routine loans, for example, for a used car. Smallbusiness owners have also suffered as banks have cut back. Credit unions have filled the gap. Around the country, credit unions now have 92 million members and have grown rapidly. In Michigan alone, they gained 59,000 new members in one year. Claudia York, the interim president and CEO of Chief Financial Federal Credit Union in Pontiac, Michigan, says, “We’ve been getting many more inquiries about [business loans]. We have not tightened up at all—we have money to loan. We’re trying to be as generous as possible while still adhering to our [lending] guidelines.”

Credit unions don’t perform all the services of traditional banks, however. Only 59 percent of credit unions issue ATM cards. Those cards are usually part of a network of ATM machines at, for example, 7-Eleven, Walgreens, Costco, or even banks. Only 22 percent of credit unions have safe-deposit boxes. And most credit unions have only one branch, or even none.

Both the CUNA and NCUA Web sites have online tools to help you find a credit union near you. Allan McMorris, the president and CEO of Michigan’s Oakland County Credit Union, said, “I’m very proud of the fact that in this tough economy, we are going to set a record in the number of loans disbursed. And of course, that’s all local money on deposit and local loans. In our local economy, we think we’re helping with the recovery.”