Credit unions trace roots to Catholic social teaching on subsidiarity, leveraging community-driven finance to serve families
FARMINGTON HILLS — There are Catholic schools that nurture the mind and Catholic hospitals that nurture the body. But Catholic credit unions?
In fact, Catholic credit unions have a long history of serving individuals, parishes and Catholic organizations in the United States, dating back to the turn of the 20th century. But what do financial institutions have to do with following Christ? And what exactly makes a Catholic credit union "Catholic?"
Catholic credit unions aren't as numerous as they once were. In 1960, there were 825 Catholic credit unions in the United States, while today there are fewer than 90, according to Robert Klosko, administrator of the Catholic Credit Unions of America, a national association of Catholic credit unions.
Many of the original Catholic credit unions in the United States formed to serve individual parishes, many of which were made up of immigrant communities.
“Credit unions formed in the early 19th century in Italy and Germany,” Klosko said. “We can’t say the Church founded the idea, but very early on in the development of credit unions, Catholic parishes were heavily involved, basically because the Church was taking a holistic approach to caring for the whole human person, the traditional understanding of a person in three parts: the mind, the body, and the spirit.
“The credit union helped people take care of their temporal needs, specifically for Catholics in the early 20th century, who in this country tended to be in the middle and lower classes,” Klosko said.
In the early 20th century, many Catholics coming to the United States didn’t have much in material goods and weren’t seen as a wise investment for banks giving loans. The first credit union in the United States was the Peoples’ Bank of St. Mary’s, in Manchester, N.H., founded by Msgr. Pierre Hevey in 1908 as a way for the Franco-American mill workers who primarily populated his parish to save money and get loans.
“Credit unions developed because middle-income and poorer people were not being served by banks, because you can’t make as much profit doing things for poor people as you can for wealthy people,” Klosko said. “Oftentimes, for-profit banks would take advantage of populations or ignore populations. Credit unions are kind of a mutual aid society that allows people who have a common bond to band together.”
Eventually, credit unions expanded beyond Catholic parishes, with most credit unions today being connected to trade unions, universities or geographic regions.
Keith Burke, vice president of marketing and community relations for the Farmington Hills-based Alliance Catholic Credit Union (ACCU), said the credit union traces its roots back to two parish-based credit unions, St. Alfred’s Credit Union in Taylor and Guardian Angels Credit Union in Clawson, in the 1950s.
These parish-based credit unions provided financial capital for parishioners who needed a loan but were shut out of traditional banks. Eventually, through a series of mergers between other parochial credit unions, Alliance Catholic Credit Union was born in 2013. Today, it is the most prominent Catholic credit union in Michigan — managing an estimated $500 million in assets.
“Credit unions are what we call financial cooperatives, with the key difference being ownership,” Burke told Detroit Catholic. “Credit unions are member-owned; everyone who opens an account becomes a member, becomes an owner in that not-for-profit cooperative, governed by a volunteer board of directors made up of members who manage the credit union, providing lower fees, lower rates and financial support for the community.”
Many Catholic credit unions have lost their Catholic identity over the years as they have expanded their field of membership, making it incumbent upon remaining Catholic credit unions to reinforce their Catholic heritage, Burke said.
“Maintaining that Catholic identity comes through culture and viewing finances with a Catholic lens — the idea of treating everyone with mercy, grace and charity,” Burke said. “We also maintain our identity through our sponsorships in the community, our partnership with the Catholic High School League, and Catholic school scholarships."
Each year, Alliance Catholic Credit Union sponsors its "Live it. Show it. Share it." scholarship contest, which gives away $20,000 to 10 students who attend Catholic schools in the Archdiocese of Detroit. Alliance also sponsors initiatives such as the Detroit Catholic Young Adult Soccer League, and sets up displays at ACCU locations to collect items for Catholic Charities of Southeast Michigan’s Walking With Moms in Need program.
“We like to say, ‘Put your money where your faith is,’” Burke said. “There are not a lot of times when your ordinary transactions can be associated with a Catholic identity. We are not a Catholic organization sanctioned by the Church or the archdiocese, but we have Catholic membership and the support of the Catholic community. As a member of the local Catholic community, part of our work is giving back to the community, being a force for good.”
Every pope from Leo XIII to Francis has extolled the virtues of credit unions as a community-focused way to give people access to capital, based on the Catholic principle of subsidiarity, Klosko said.
Catholic credit unions have played an integral role in shaping the history of Catholicism in the United States, Klosko said, and their new challenge is maintaining that connection in a changing landscape.
“Some Catholic credit unions have merged with each other to form larger Catholic credit unions, and some have merged with secular credit unions in order to survive,” Klosko said. “Some of them are starting to operate like a bank, which is unfortunate. The credit unions that keep their Catholicity do so by being intentional, paying attention to their mission, by being relational, not transactional.”
Beyond supporting Catholic education and faith-based initiatives, Alliance Catholic Credit Union has evolved with the times in the world of finance, Burke said, from online banking to tellers who connect remotely from the credit union’s headquarters to its 11 branches.
Like many banks and credit unions, Alliance offers financial products that include home and auto loans, business loans, personal checking and savings accounts and investment and insurance options.
“To stay relevant as the industry evolves requires products and services an individual parish just couldn’t manage, such as the evolution of online apps and mobile banking to supporting credit cards. Those are expensive services that require capital investments and technology the small, parish credit unions couldn’t provide,” Burke said. “People can love what you do, believe in what we do, but at the end of the day, the customer needs a mobile app, they need to pay their bills online, and they expect a level of sophistication from financial institutions.”
Banks have received increased scrutiny since the 2007-08 financial crisis, and the recent collapse of larger institutions such as Silicon Valley Bank shows there's still work to be done, but credit unions, in general, are perceived to have a better reputation, Klosko said, due to the nature of how they are structured.
Credit unions’ deposits are protected by the National Credit Union Association (NCUA), the credit union’s version of the FDIC, which protects deposits up to $250,000, and most credit union accounts are below that threshold, Klosko explained.
“Credit unions aren’t receiving the same sort of criticism,” Klosko said. “There are inherent risks in every form of banking everywhere, but what makes credit unions a little safer is they tend to have many small deposits.”
It's up to the individual members — who elect the board of directors — to keep the Catholicity of a Catholic credit union strong, Klosko said, being good stewards of the credit union’s resources and being a force for good in the community.
“In the line of Catholic social teaching, the principle of subsidiarity aligns with the people closest to the problem, the membership, as opposed to disinterested, third-party shareholders," Klosko said. "There are no perfect safeguards, but that’s why you see credit unions live out that Catholic identity.”
It's that dual role — being financially prudent while maintaining the core values that were established way back when Msgr. Pierre Hevey founded the Peoples’ Bank of St. Mary’s in Manchester, N.H., back in 1908 — that allows Catholic credit unions to provide financial services in healthy, Catholic way, Burke said.
“Being a Catholic credit union is something we are really passionate about,” Burke said. “There will always be a need for Catholic credit unions, to serve the local Catholic community with our values. We always look at the number of Catholics in the Archdiocese of Detroit or the state of Michigan. It's a big population, and it give us an incredible opportunity to serve the people of the area.”