Audit and Accounting Guide Depository and Lending Institutions, 2nd Edition

Chapter 2 Industry Overview—Credit Unions

Description of Business

2.01 The first credit union in the United States was organized in 1908. Although credit unions originally arose within communities, greater success was achieved by organizing credit unions to serve employee groups—particularly government employees, teachers, railway workers, and telephone company employees. A credit union is a member-owned financial cooperative, democratically controlled by its members and operating for the purpose of providing financial services to its members. Credit unions are organized as not-for-profit entities and are exempt from certain taxes. A credit union is subject to rules that restrict membership to the entity.

2.02 In 1934, Congress passed the Federal Credit Union Act (FCUA), establishing a federal regulatory system, which authorized the formation of federally chartered credit unions in all states. In 1970, the National Credit Union Administration (NCUA), an independent governmental agency, was created by Congress to charter, supervise, and regulate federal credit unions. It also extended supervision to state chartered federally insured credit unions. Other legislative initiatives that have affected credit unions include the following:

• In 1970, the National Credit Union Share Insurance Fund (NCUSIF) was formed to insure credit union share (deposit) accounts up to applicable limits in all federal credit unions and federally insured state-chartered credit unions.
• In 1977, legislation ...