The name Edward Filene might inspire fond memories of deep discounts and the annual “running of the brides" here in the Boston area, but his legacy — cemented 85 years ago today — goes well beyond his famed "Basement" stores. The department store magnate is also known as the father of the American credit union movement.
Today, credit unions may look and act much like banks, but they are a different animal.
"Credit Unions are not-for-profit, member-owned financial cooperatives," explained Ronald McLean, president and CEO of the Credit Union Association.
As a cooperatives, credit unions’ owners are its customers. Their boards of directors are all-volunteer, voted in by the members.
"When a credit union earns a profit, that profit goes back to the members in the form of lower fees, better rates [and] services" said McLean.
Unlike a bank, membership in a credit union is restricted to some particular group, but those groups range widely. You might need to work in a certain field, belong to a certain church, be in a particular association or live in a specific geographic area.
"You do need to be eligible for it," said McLean. "But I like to say that everyone can’t join every credit union, but there is a credit union for everyone."
In the early years, credit unions only offered members savings accounts and loans, but McLean said today, many credit unions offer the same plethora of options you’d expect from any bank.
America’s first credit union was established in 1909, organized by a parish priest in Manchester, New Hampshire to provide banking services for French-speaking Canadian immigrant mill workers.
"The banks downtown weren’t interested in helping the mill workers," said Stephanie Smith, executive director of America’s Credit Union Museum in Manchester, located in the house where that first credit union was established. "They were banks that were for the mill owners."
And this grassroots approach to banking caught Edward Filene's attention.
"Edward Filene was very passionate about two things: travel and credit unions," said Smith. "And he invested over a million dollars of his own money to help establish credit unions."
With Filene’s help, Massachusetts became the first state to pass legislation allowing for the establishment of credit unions, which served as a model for the Federal Credit Union Act, signed by President Roosevelt on June 26, 1934.
"The framework that was established in Massachusetts in 1909 is exactly the framework that credit unions to this day still adhere to," said Smith.
Today some 100 million-plus Americans belong to credit unions. In Massachusetts, roughly 45 percent of the population has membership in at least one. Still, they constitute less than 10 percent of the financial services market.
"It comes down to, what do you truly value in your relationship with your bank or your credit union?" said Eric Roberge, a certified financial planner with Beyond Your Hammock.
Roberge said the promise of better rates and lower fees at credit unions sometimes bears out — especially when it comes to auto loans and savings accounts. And customer service tends to be stellar. But, he said, now they too often fall short in one crucial area.
"It’s the online access," he said. "You can see your accounts through an app, deposit a check through an app, make transfers online [with a regular bank.] And I think that’s where the technology is really lacking in credit unions. Because they’re not-for-profit, they don’t have the dollars coming in that a bank would have, and therefore they can’t spend on technology, which is super expensive."
The Credit Union Association’s Ron McLean said technology is a major point of emphasis for credit unions right now. And coincidentally, Filene’s Basement survives today as an online-only retailer. So maybe its original owner's favorite kind of financial institution has a bright future there as well.