People Helping People: The Evolution of Credit Unions

Credit unions have evolved, but their central mission remains the same. How can we leverage this unique approach to strengthen the industry’s future?


Last Thursday was International Credit Union Day, the day those of us who work for credit unions pause for a moment to think about the origins of this important social and economic movement.

People helping people. If you’ve been around you know the history, yet a good story is worth the retelling. Sparing details, some very smart individuals realized that people of limited means had no access to affordable credit. In fact, for people without money the only credit available prior to the birth of credit unions was both expensive and dangerous. These same folks realized that if people of limited means pooled their money they could make loans to each other at rates they could afford.

We’ve become a great deal more sophisticated since the 1930s by staying true to the premises established by our founders. Abundant examples of members benefiting from the power of cooperation are everywhere. With housing so expensive, though, the most current illustration is making the dream of homeownership an affordable reality. Credit unions haven’t been known as a powerful force in housing finance. That’s changing. In many markets around the country, credit unions are gaining reputations as the place to get a mortgage. What’s causing the shift? Credit unions helping credit unions, that’s what.

You might think there’s nothing new here. Credit unions have worked together through central organizations since Filene and Bergengren started this enterprise more than 70 years ago. What is new, though, is the nature of these central organizations is changing. Smaller, nimbler and in very close touch with the needs of their member/owners are some of the common characteristics they share.

Mortgage lending offers just such an example. Peruse the annual list of the top 200 lenders. How many credit unions make the cut? Less than twenty? Less than ten? Somewhere in the middle the truth lies. And the truth hurts: the business of financing homes is highly competitive. Big lenders have an easier time thanks to the law of large numbers. The stark reality is that five, count them five, mortgage lending institutions command a whopping 70 percent of the market. None of these five are credit unions.

The gang of five has no plans to stop and smell the roses. Far from it. Through overt strategies like good old-fashioned competition to more covert means like GSE Reform Legislation, they have designs on much higher share. Market concentrations like this are seldom good for the consumer, since there’s little incentive for suppliers to compete seriously.

Back to the central point. Smaller lenders -- credit unions -- are left to fend for themselves, just like the early potential credit union members before there were credit unions. If we try to work with the big lenders, our members end up paying too much. If we go it on our own, we don’t have the scale to compete, and our members wind up paying too much. Stuck on the horns of a dilemma, what do we do?

Simple. Let’s do what we’re best at: finding strength and creativity from within, something we’ve done time and again for many different purposes. If members are to have affordable, high-quality access to housing finance, we’ll have to create it ourselves, leveraging the cooperative ideals we celebrated last week. If you’re not an active mortgage lender, find one of those nimble credit union providers that fits your needs. Then get in the game. If you’re in the game, now’s the time for some agonizing reappraisal. Make sure your lending partners have the same objectives you do: helping members affordably make the American Dream come true.



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Oct. 24, 2005


  • Now this writer has passion--for credit unions and home lending. He is a believer. Great to read such enthusiasm and hope for cu's!