The National Credit Union Administration is an independent agency of the United States government that is responsible for chartering and overseeing the activity of the nation's several thousand federally-chartered credit unions. Established in 1934 as part of New Deal legislation, the agency was first known as the Bureau of Federal Credit Unions and was part of the Farm Credit Administration. Its mandate was made necessary by the growing popularity of credit unions across the United States, which itself was primarily due to the reluctance of most banks at the time to offer banking services to consumers at reasonable costs.
Credit unions can be described as banking cooperatives. Owned by their depositors, they offer banking services such as checking and savings accounts, auto loans, credit cards, and residential mortgages to members at rates generally lower than those offered by commercial banks. Like banks, credit unions must be chartered. While some are chartered by the state in which they operate, most are chartered and supervised by the federal government through the National Credit Union Administration, much the same way that banks are supervised by the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC).
Credit unions came into being in Europe in the mid-19th century to serve the financial needs of farmers and merchants, whose business was viewed with disdain by the major commercial banks of the time. These borrowers usually were charged exorbitant interest rates by the banks, far higher than those charged to large businesses and the wealthy. The first credit unions were formed primarily to provide affordable credit to farmers for the purpose of buying supplies, equipment, and perishables like seeds and livestock. The first credit union in the United States, established in 1909, brought affordable credit to the farmers of Maine, and it proved so popular that by 1925, legislation had been enacted in more than half the states providing for the chartering and regulation of credit unions.
The 1934 legislation establishing the forerunner of the National Credit Union Administration set forth national standards for credit union administration and membership, as well as for the products and services credit unions could offer. Importantly, membership in credit unions was more clearly defined. Originally, credit unions were created to serve the members of particular groups — employees of a particular company, for instance, or members of a specific labor union, or people with some other common bond, such as membership in a church or professional organization. Many modern credit unions operate with only limited restriction on their membership, such as geographical area.
The National Credit Union Administration creates and maintains guidelines from which credit unions adopt their policies and practices. Each union's particular policies and practices are adopted by boards of directors elected by the members, but are governed by the guidelines set by the National Credit Union Administration. For example, most credit unions offer traditional banking services, such as checking and savings accounts and consumer credit, including automobile loans, but not all offer residential mortgages. The decision of which products to offer is made by the credit union's directors, but must be consistent with the policies and guidelines of the National Credit Union Administration.
The National Credit Union Administration provides deposit insurance for depositors in credit unions through the National Credit Union Share Insurance Fund (NCUSIF). Like the FDIC, the NCUSIF is funded by premiums charged to member institutions, and both are backed by the full faith and credit of the United States government.
