New federal laws and regulations are changing the structure and face of the financial services industry. In this time of accelerating change, it is important to truly understand how credit unions are unique and different, and why we remain a necessary and extremely popular financial alternative for 87 million Americans.
- Ownership. Credit unions are an economic democracy. Each credit union member has an equal ownership in their credit union and one vote in the credit union’s business operations -- regardless of how much money the member has on deposit. At a credit union, every user is both a member and an owner
- Not-for-profit. Credit unions are not-for-profit financial cooperatives. They exist to serve member/owners, not to make a profit. Unlike most other financial institutions, credit unions do not issue stock or pay dividends to outside stockholders. Instead, earnings are returned to member/owners in the form of lower loan rates, higher interest on deposits, and lower fees.
- Taxation. Credit unions do pay taxes - payroll taxes, sales taxes, and property taxes. Congress exempts credit unions from federal income taxes. The exemption was established in 1937, affirmed by statute in 1951, and re-affirmed in 1998 in H.R. 1151, the Credit Union Membership Access Act, which states:
"Credit unions, unlike many other participants in the financial services market, are exempt from Federal and most State taxes because credit unions are member-owned, democratically controlled, not-for- profit organizations generally managed by volunteer boards of directors and because they have the specified mission of meeting the credit and savings needs of consumers, especially persons of modest means."
- Volunteer Boards. Each credit union is governed by a board of directors, elected by and from the credit union's membership. Board members serve voluntarily without compensation.
- Membership Eligibility. By current federal statute, credit unions cannot serve the general public. People qualify for credit union membership through their employer, organizational affiliations like churches or social groups, or a community-chartered credit union.
- Financial Education for Members. Credit unions assist members in becoming better- educated consumers of financial services. Many credit unions partner with local high schools to expand financial education among high school students. A national study shows that just ten hours of personal finance education can positively affect students' spending and savings habits for a lifetime.
- Social Purpose: People Helping People. Credit unions exist to help people, not make a profit. Their goal is to serve all members well, including those of modest means - every member counts. Members are fiercely loyal to their credit union for this reason. They know their credit union will be there for them in bad times, as well as good. The same “people-first” philosophy causes credit unions and their employees to get involved in community charitable activities and worthwhile causes.