Open Credit Unions to All

Over the years, credit unions have been extraordinarily successful in the paradigm of controlled membership. People have flocked to us; people choose us. Those on the outside hear of us and want to join. Should we not break the old paradigm and create open financial cooperatives to allow them to do so?


We talk about the "future" for credit unions, about "vision." But we seem loathe to broach this subject of opening credit unions to any citizen. We do not discuss it out loud in credit union forums or before Congress. Perhaps it seems too sweeping, perhaps too daunting a leap, but we should not kid ourselves: When we talk about the future for credit unions, this is the question we face. We have been extraordinarily successful in our paradigm of controlled membership. People have flocked to us; people choose us. Those on the outside hear of us and want to join. Should we not break the old paradigm and create open financial cooperatives to allow them to do so?

Many early pre-Federal Credit Union Act (FCUA) credit unions were open to anyone who wanted to join. As the movement grew, in order to gain support among state and federal legislators, credit union people agreed to limit their membership. Still, we have attracted about 80 million Americans, one-fourth of the entire population. Is it not now time to dismantle the last barriers and allow a freedom of choice to all Americans - capitalistic, stockholder-oriented banks or cooperative, member-oriented institutions?

Possible Critics
There might be three kinds of people who would object to this new vision: bankers; credit union people who believe the FCUA is sacrosanct; and credit union people who believe FCUA merely codified principles of limitation, ones that should remain in force.
Take bankers first. They see us a threat and have traditionally objected to any expansion. They see the loss of paying customers. Count on them to object.

Then there are credit union people who take shelter in the 1930s FCUA. They believe Congress intended limited membership and protected territories and that since we've done well under FCUA, it should not be altered. These arguments neglect the fact that 70 of arguably the most dynamic years of change in human history have passed since FCUA. To quote Abraham Lincoln: "As our case is new, so we must think anew and act anew."

And then there are those who believe that FCUA merely codified what existed pre-1930s. Actually, FCUA was a compromise, the best likely that those who worked in the movement then could achieve. At the time, 21 states did not think non-profit financial cooperatives were a good idea at all.

In any case, worrying over Congress's intent is not the point. Congress is meant to represent the will of people now alive, not those long gone. If we want a new law, we should be able to have one written through our representatives - this is the essence of republican government.

Let us not be afraid of change, of losing protected territories and protected FOMs. Let us rather think of the millions of Americans who, unlucky enough to be excluded from conditions of membership and thus membership benefits, will be able to avail themselves of these marvelous institutions.

Open us up to all. That's a win-win situation.




June 3, 2002


  • This article hits directly at the heart of defining the future for credit unions. I would be interested in hearing the comments of other credit union professionials.
  • Agreed. Individuals should be able to choose non-profit financial co-operatives or for profit institutions. Unfair advantage will be claimed by banks but why should the public be forced to do business with for-profit entities if they can't compete on price and service.
  • My wife and I belong to at least ten Credit Unions that are state regulated. We are not allowed to join Federal charted credit unions for some reason. The way we make money on money is what we call "Cherry Picking Interest rates" and this is the way Seniors do it. Thanks for allowing my opinions Jerry & Karen Webster Mesa, Arizona
  • I'm all for open CU membership. Wonder if CCUL would care to lead the charge? Jack Emerson, SAFE CU
  • Credit unions are what they are today because of their roots. Sure you can open up your membership to everyone and compete with the other intuitions who’s roots are profit making and for the benefit of a few. Competition breads higher fees, quotas for growth to compensate for the increased cost of competition, dilution of you common bond when it comes to membership pride and being part of something different, start to sound like a bank, it is! We can see the change in our local credit union community. CEO's are not as open to each other as they were before now that we are competing for each others members. Local chapter meetings are more subdued and lacking in attendance because of ill feelings (competition)!! There was a time when I pulled the local bank rates to see where we stood. Now I only look at the competing credit unions. I think the banks have us right where they want us, competing against each other. I can assure you that when it comes time to go in front of congress to preserve our tax exempt status the larger, open members ship based credit unions, will want to show off the smaller credit unions to make their point and guess what we won’t be there....
  • all though the subject is very interesting, the resulting change in FOM will result in Federal taxation. while all not bad, the result will be the death of some credit unions and unfair taxation to cus. there is no way that most credit unions will be able to take advantage of the tax exemptions and loopholes that are currently employed by most banks.
  • I couldn't agree more. We in Washington State are allowed statewide memberships based on communities through a simple board approved bylaw amendment. A great deal of fear is being generated in the credit union community. Fear of getting the banks mad and bringing on taxation. Our regulator has the opinion that competition is good for all consumers and has eased the rules to allow all Washington citizens a choice of any bank and now a great number of credit unions.