Credit Unions Law and Legal Definition
A credit union is cooperative financial institution that makes low interest personal loans to its members. It is usually composed of persons from the same occupational group or the same local community. Shares sold to members and members' savings deposits funds lending activity. Credit unions are formed locally and nationally and are subject to state and federal laws.
A federal credit union is a financial cooperative chartered by the federal government and owned by its members. Federal credit unions offer members a safe place to save and borrow at reasonable rates. Surplus income is returned to members in the form of dividends.
The U.S. Congress drafted and President Roosevelt signed the Federal Credit Union Act in 1934. This Act established the federal credit unions system and created the National Credit Union Administration's predecessor to charter and supervise federal credit unions. The general provisions in the Federal Act are similar to those of many state credit union laws.
The following is an example of a state law regulating credit unions:
"Every credit union carrying on a credit union business in the state other than federal credit unions shall be subject to the supervision and inspection of the Bureau of Credit Unions and the supervisor thereof. The Supervisor of the Bureau of Credit Unions shall, either personally or by competent examiner serving under him, visit and examine every credit union doing a credit union business in and under the laws of the State of Alabama at least once in each year. On every such examination, inquiry shall be made as to the conditions and resources of the credit union, the mode of conducting and managing the affairs of the credit union, the action of its directors, officers and manager, the investment of the funds of the credit union, the safety and prudence of the management of the credit union, whether the requirements of its charter and of law have been complied with in the administration of the affairs of the credit union and as to such other matters as the Supervisor of the Bureau of Credit Unions may prescribe. In addition, the Supervisor of the Bureau of Credit Unions shall in like manner examine or cause to be examined into the affairs of every credit union whenever, in the judgment of the Supervisor of the Bureau of Credit Unions, the management and condition of the credit union is such as to render an examination of its affairs necessary or expedient or whenever, in the opinion of the Supervisor of the Bureau of Credit Unions, the interest of the public demands an examination."
