Verment's credit unions have prospered in the shadow of multi-state bank mergers and acquisitions. At a time when financial services sectors are increasingly consolidating banking, insurance, investment - they provide their ownermembers with more basic services, including share ownership versions of checking and savings accounts, personal and sometime mortgage loans, and debit and sometimes credit cards.
Like Vermont's independent community banks, with which they sometimes have very cordial relationships, they appeal to those who have had enough of navigating telephone voice messaging systems, dealing with distant owners of resold mortgages, and struggling to get minor errors corrected.
There can be monetary advantages in belonging to a credit union, in terms of lower borrowing rates, lower credit card interest, and dividends if the non-profit organization has a surplus. But those in the field again and again said the main reason for their historic growth has been the desire for truly personal banking, on a first-name basis. One source, who asked not to be named, summed up by saying, "Every time there is a bank merger, we get more members."
Another factor is the "flight to quality" among investors, which has also helped boost the community banks' reputations following the stock market debacle of the past couple of years. This may continue to motivate people to put at least part of their money in local credit unions, since the plunge that appears to be giving way to malaise rather than recovery in the wake of the Enron accounting scandal. Which is not to say that hard times have not affected the credit unions.
John Revilla, vice-president of the Vermont Credit Union League, said that many members have trouble finding enough loan opportunities for the influx of savings money. Meanwhile, with interest rates so low, "it's hard to get more than 1 percent' on investment of the accumulated money.
Belonging to such a cooperative is not an option for all Vermonters.
Joseph Bergeron, president of the 41-member Vermont Credit Union League, said that roughly 20 percent of the state's population is eligible to belong to one. But growth and consolidation are taking place in the credit union world as well. The trend has been for smaller groups to merge, and for larger groups to use the additional financial capacity to offer more and more services as demanded by their members. Relations with the rest of the depository world have sometimes been tense.
The Vermont Bankers Association has criticized the credit unions' taxexempt status as giving them an unfair advantage. On the other side of the ledger, credit unions complain about the statutory cap on business loans, at 12.5 percent of their assets, that has kept them out of potentially lucrative markets.
In general, the two cultures have coexisted in Vermont more amicably than in the country as a whole. At one point in the 1990s, the American Bankers Association brought a federal suit claiming that the enabling legislation for credit unions limited them to a single employee group. The matter went to the Supreme Court, but Congress took the issue off the judiciary table by amending the credit union act to allow broader membership.
"Select employee groups" keep joining existing credit unions, and communitywide and even county-wide membership are permitted. It may be only a matter of time, assets, and executive experience before most Vermonters have such an opportunity to literally take stock of their finances.
Sometimes it takes a century
According to information from the Credit Unions National Association, the idea of forming an association in which people borrowed money from each other evolved from other cooperative activities in 19th century Europe.
In CUNA's words, "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."
Early in the 20th century, Canadian credit unions started to form. They drew the attention of Pierre Jay, the Massachusetts banking commissioner, and Edward A. Filene, a Boston merchant, who helped organize public hearings on the credit union legislation. It passed in 1909, and a handful of other states followed that example.
By 1921, there were only 199 in the entire country. But Filene did not give up, and in 1921 hired Massachusetts attorney Roy F Bergenren, who was instrumental in causing credit union membership to soar. By 1935, 39 states had credit union laws, and there were 3,372 credit unions with 641,800 members.
The year 1934, in the depths of the Depression, was a major turning point. Congress passed legislation allowing credit unions to be formed anywhere, either under federal or state charter, and CUNA came into existence as well. One key step was extending to credit unions the same $100,000 level of account insurance that had been given to bank deposits through the FDIC.
World War II stalled the movement's growth - in 1945, there were only 8,683 credit unions - but by 1955 this had grown to 16,201; and by 1969 they numbered 23,876 - the peak, as mergers began to reduce the total. Membership doubled in the 1970s to more than 43 million people, and CUNA's most recent count was about 43 million members.
Vermont started late: in 1943, there were only three credit unions, with 1,212 members. The State did not start tallying assets until 1953, when there were 50 credit unions with 7,658 members and $819,545 in pooled money. Corresponding figures for subsequent years were as follows:
- 1963: 68 - 21,705 - $8,628,116.
- 1973: 71 - 43,262 - $30,021,260
- 1983: 68 - 77,830 - $119,048,215
- 1993: 46 - 93,765 - $338,070,515
- 1998: 40 - 117,296 - $506,237,097
- 2000: 38 - 131,031 - $557,286,479
The years with the largest membership growth were 1968, with 12,748, and 1978, with 12,385. Perhaps not coincidentally, this was also the period in which many areas of Vermont were forming food-buying cooperatives - another mutual aid movement that has proved to be an enduring presence.
From 1990 to 2000, there was a 46 percent increase in the number of credit union members. For the same period in New Hampshire, the comparable figure was 18 percent.
The Vermont has both federal and state credit unions, the former helping to bridge nominal divides in economically functional regions such as the Connecticut River Valley. In 2000, the latest year for which the Banking Division has posted information, the three largest were:
* New England Federal, based in Williston, with $308,438,346 in assets.
* Vermont State Employees, based in Montpelier, with $249,070,851.
* Vermont Federal, based in Burlington, with $72,254,404. The three smallest, all state-chartered, were: - Saint Patrick Parish, based in Fairfield Center, $341,206.
* Northwest Teachers (Vermont Educational Association), based in St. Albans, with $288,997.
* Edlund Company Employees, based in Burlington, $261,980.
Increasingly, the names have been diverging from the realities of how business is done.
A small credit union that appears to be operating independently, such as the office of the Vermont Grocers Credit Union in Rutland, may actually have merged with another, far-flung credit union. In the case of the Vermont Grocers, they are now part of the Green Mountain Credit Union, whose ambiguous name actually refers to its historical beginnings in 1959 with employees of Green Mountain Power.
The mergers sometimes result in farflung entities with even more tenuous connections than some of the proposed crossmountain reapportioned legislative districts. For instance, the NorthCountry Federal Credit Union, headquartered in South Burlington, started in 1950 with area General Electric employees.
In 1987, spurred by news of GE's intention of closing the plant, the 4,800-member group changed its charter and began looking for partners to add to its $15 million asset base. Ben & Jerry's Homemade in Waterbury, the Adamant Credit Union in Montpelier, and the Northeast Credit Union in Lyndonville would eventually join Chittenden County members like Bombardier Capital Mortgage, IDX, Vermont Teddy Bear and the Burlington Free Press. NorthCountry is now in the Vermont top five, with around 13,000 members in about 150 companies.
Local proximity is not an issue, in an era of electronic data management, telecommuting, and - teleconferencing. More significant is the way combining memberships allows the credit unions to acquire the often expensive technology that enables state-of-the-art services.
No recession here
The experiences of individual credit unions vary, and the recession has affected them to different degrees. But judging by the experience of the nation's federal credit unions, 2001 wasn't such a negative year.
