A credit union is a member-owned, nonprofit, financial cooperative organized to provide financial services to benefit consumers. Credit unions usually encourage savings and offer competitive rates for loans. Credit unions typically have a membership base that unites Its members such as having the same occupation or employer, belonging to the same association, or religious group, or living in the same community. The board of directors of the credit union is typically elected by the members.
Credit unions developed at a time when banks were not very interested in the consumer market, especially in small deposits and loans typically needed by working class people. The credit union idea came to the Unites States from Germany, where the first credit union was formed in 1850. The first U.S. credit union opened in 1909, in New Hampshire. In California, the first credit union was formed in Fresno in 1924, and the first California credit Union law was enacted in 1927. This paved the way for the widespread development of credit unions in the state. The number of credit unions grew even more rapidly after the formation of the California Credit Union League in 1933 and the passage of the Federal Credit Union Act of 1934. California passed an updated version of its credit union law in 1951, which explicitly affirms the democratic purposes of credit unions.
Community Development Credit Unions (CDCUs) are credit unions organized in predominantly low-income communities. In addition to providing for consumer needs, they have an explicit mission of community reinvestment and revitalization. They provide financing for housing acquisition and rehabilitation, and for small businesses which are both privately and cooperatively owned. CDCUs were developed in response to findings that traditional financial institutions take out more capital from low-income communities than they put in.
California credit unions can be chartered under either federal or state laws, but most are federally insured. In both membership and economic terms, credit unions comprise the largest consumer cooperative sector in California and represent a large share of the financial services industry.