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Basic Information About Credit Unions
Overview:
More than 86 million U.S. consumers are member-owners of,
and receive all or part of their financial services from the
nation's more than 8,500 credit unions. Credit unions are
not-for-profit financial cooperatives, serving members who
share something in common: employment, association
membership, or residence in a particular geographic area.
As not-for-profit cooperatives, credit unions generally offer more
attractive savings and loan rates, and low or no fees.
Surveys consistently rank credit unions first among
financial institutions in consumer satisfaction.
Philosophy
and Structure:
Credit unions are democratically owned and controlled
institutions, based on "people helping people" principles.
Credit union boards of directors are elected by members;
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 117,900 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 1980s, early 1990s, and last several
years. Credit union capital is 10.7 percent and the equity
ratio of the federal insurance fund, National Credit Union
Share Insurance Fund (NCUSIF), has operated with an equity
to insured share ratio of at least 1.25 percent for twelve
consecutive years.
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 1 percent of their
insured member savings in NCUSIF, to bring its equity ratio
up to 1.0 percent. This recapitalization 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 recapitalization
of NCUSIF before problems occurred, and the mechanisms in
place to keep the fund highly capitalized, illustrate credit
unions' commitment to safety and soundness.
State-chartered credit unions in selected states --
including Ohio -- can opt to carry private insurance through
American Share
Insurance (ASI). Private insurance
protects
member deposits to a minimum $100,000.
Federally
insured and privately insured credit unions also carry
excess insurance on deposits through ESI.
Regulation
and Supervision:
Federally
chartered credit unions are regulated by the National Credit
Union Administration (NCUA), an independent agency. NCUA's
three board members are nominated by the President and
confirmed by the Senate.
State
chartered credit unions are regulated by their state credit
union department. NCUA administers NCUSIF, and all
federally-insured credit unions are subject to insurance
examinations as well. No taxpayer money is used for
regulating and overseeing credit unions, as all activities
of NCUA and NCUSIF are funded by credit unions.
In Ohio,
state-chartered credit unions are regulated by the
Ohio
Department of Financial Institutions, under the Commerce
Dept.
U.S.
Organization:
Overall, 90 percent of credit unions, both federally and
state chartered, representing 93 percent of total credit
union assets, are affiliated with the Credit Union National
Association (CUNA), and its 50 state-based affiliates
(leagues). CUNA maintains offices for fee-based services in
Madison, Wisconsin, and the offices of the president and
governmental affairs in Washington, D.C.
Market
Share:
Credit unions are a small, but constant presence in the
financial services industry. Credit unions held 2 percent
of household financial assets as of June 2003, according to
Federal Reserve data, and have held a share below 2 percent
since 1980.
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