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 $B 37 STl 
 
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 CREDIT UNION PRIMER 
 
 by 
 
 ARTHUR H. HAM 
 
 and 
 
 LEONARD G. ROBINSON 
 
 Published by 
 
 Division o:p. Remedial Loans 
 
 Russell Sage Foundation 
 
 13d East 22nd Street 
 
 New York City 
 
 1914 
 
 Price 25 Cents 
 
GIFT OF 
 
Digitized by the Internet Archive 
 
 in 2007 with funding from 
 
 IVIicrosoft Corporation 
 
 http://www.archive.org/details/creditunionprimeOOhamarich 
 
GIFT 
 NOV 19 1915 
 
 RL14 
 
 THE LOAN SHARK CAMPAIGN 
 
 by 
 
 MALCOLM W. DAVIS 
 
 •R-S 
 •F- 
 
 Reprinted from the 
 New York Evening- Post, April 11, 1914 
 
 BY THE 
 
 Division of Remedial Loans 
 Russell Sage Foundation 
 
 130 East 22nd Street, New York City 
 
 April, 1914 
 
y4& 
 
 ^0 
 
 ^1 
 
THE LOAN SHARK CAMPAIGN 
 
 CONSIDER the plight of the man who needs a little ready 
 money quickly. When you're ''broke" — if you live on 
 the East Side — or "embarrassed by a temporary shortage 
 of funds" — if you live on the West — there are just three ways in 
 which, lacking a bank account or valuable property, you can get 
 it. You can go to a friend or possibly to your employer to borrow 
 it; you can go to a reputable loan agency and get the money on 
 your note, secured by small personal belongings, or you can go to 
 a "loan shark," who will doubtless charge you an illegal and 
 usurious rate of interest, get away from you as much of your 
 money as he can, and, if you happen to be poor, seize your prop- 
 erty if he can and go to any length to realize on an illegal claim. 
 It is the operation of this last parasitic and oppressive business 
 which experts in the fight for a better living and working chance 
 for everybody are now studying to destroy. 
 
 That there is a real necessity for good loan companies to exist, 
 even in a pretty well organized society, and that such companies 
 have to charge a rate of interest much in advance of that usually 
 earned by money loaned for business enterprise, have been the 
 two facts hardest to teach to men and women who would naturally 
 be interested in a campaign against loan sharks. In general, 
 they have been attempting the old but still specious method of 
 "legislating people into righteousness," and have contented them- 
 selves with passing laws prohibiting usury. The impression 
 seems to have been that when such laws were passed the loan 
 sharks would immediately go out of business. What people are 
 beginning to realize is that bad practices are rarely stopped merely 
 by forbidding them. So long as people get into trouble and have 
 to have money on short notice, loan agencies will exist; and in- 
 stead of lessening the evil, the stricter the laws against the busi- 
 ness are made, the higher are the rates charged on loans, as 
 reward for the risks involved. The way to fight the loan sharks, 
 experts have found, is to go into aggressive competition with 
 them by passing laws which allow honorable companies to run a 
 business at a reasonable profit. This has not the pauperizing 
 effect of mere charitable relief; it gives the borrower an oppor- 
 tunity to get himself out of his difficulties without losing his 
 independent self-respect. Also, experience has proved that it 
 
 3 
 
drives most loan sharlcs ouf of business and faces the few who 
 survive with the necessity of cutting down their rates to some- 
 thing like a reasonable percentage. 
 
 SPREAD OF REMEDIAL LOAN SOCIETIES. 
 
 The most extensive organization which is carrying on this 
 work at present is the National Federation of Remedial Loan 
 Associations, with which the Division of Remedial Loans of the 
 Russell Sage Foundation co-operates in gathering information 
 and in publishing bulletins on the progress and phases of the work. 
 Founded in 1909, this Federation has grown until it embraces 
 thirty-one of the important cities from the Atlantic to the Pacific 
 Coast and has thirty-five companies in active operation. New 
 York, Syracuse, Rochester, Buffalo and Utica, N. Y., Boston and 
 Worcester, Mass., Providence, R. I., Portland, Me., Newark and 
 Paterson, N. J., Washington, D. C, Baltimore, Md., Louisville, 
 Ky., Cleveland, Cincinnati and Youngstown, O., Indianapolis, 
 Ind., Chicago, 111., St. Louis and Kansas City, Mo., Detroit 
 and Grand Rapids, Mich., Minneapolis, St. Paul and Duluth, 
 Minn., Milwaukee, Wis., Sioux City, la., San Francisco, Cal., 
 and Seattle, Wash., are the cities already officially connected by 
 companies, while Dallas, Tex., Portland, Ore., Philadelphia, Pa., 
 Lynn, Mass., and Colorado Springs, Colo., people are organizing 
 companies, and Jersey City, N. J., Dayton, O., Los Angeles and 
 Oakland, Cal., and San Antonio and Houston, Tex., are actively 
 interested and will undoubtedly start companies soon. These 
 companies generally loan small amounts of money on mortgage 
 of personal property as security, although a few also accept 
 pledges, endorsed notes, or salaries as a basis. The rates of 
 interest vary from ^ per cent, a month in a few cases to 3 per 
 cent, a month, with varying schedules of special fees for investi- 
 gation of claims and registration. 
 
 ENDING THE LOAN SHARK'S HAPPY DAYS. 
 
 What these companies have done toward putting the loan 
 shark out of business may be indicated by the experience of one 
 of them. The Detroit company started its work in 1906, after 
 the passage of the Michigan law on loan agencies, and at that 
 time there were over twenty-five loan-shark companies operating 
 in the city. For a time no effects of the reliable company's ac- 
 tivity were discernible. Then suddenly things began to happen, 
 and within half a year company after company closed up its 
 
 4 
 
office, until there was only one concern which loaned money on 
 salaries, and which was not complying with the law. There 
 were two other companies which accepted the legal limitations, 
 but the rest were put out of business directly through the efforts 
 of the prosecuting attorney, whose first evidence was furnisheii 
 to him by the remedial loan company. 
 
 In Cincinnati, O., one of the owners of a loan-shark office 
 which had been among the oldest in the city, admitted to the 
 manager of the remedial loan company, after it had been in 
 operation a few years, that the other operators might as well 
 close up shop. ''The good old days of the loan business are 
 gone forever," he said. "The Citizens' Company has queered 
 the business." In New York the results have been equally 
 successful. As a result of the competition of the remedial 
 societies and an energetic campaign by District Attorney 
 Whitman, the advertisements of loan-shark companies have 
 almost disappeared from the New York newspapers, and the 
 companies that are left have reduced rates, and are quite will- 
 ing to accept reasonable settlement of debts. Those who have 
 been in the fight claim that the bona-fide loan shark has almost 
 disappeared from the city. Everywhere the testimony has been 
 that, in the face of honest competition, the loan sharks either 
 went out of business or cut down their rates materially. 
 
 ONE VICTIM OF LOAN SHARKS. 
 
 What was meant by the "good old days of the loan business" 
 is probably fairly well understood by everybody, and yet the ex- 
 tent to which extortion has been carried would still surprise 
 people who thought they knew something of the trade. Take 
 the case of one individual, a fairly high-salaried clerk, earning 
 $2,400 a year, who was suddenly called upon to raise $400 to 
 prevent his son-in-law from going to prison. He had a large 
 family and had been unable to save, so that he had to go to 
 professional money-lenders who were in the habit of advertising 
 loans at 6 per cent, a year, but really charged from 100 to as 
 high as 1,000 per cent. The man had to go to four lenders to 
 get so large an amount. 
 
 During four years he paid back more than $2,000 on his 
 original loans, and at the end of that time he still owed, accord- 
 ing to the money-lenders, $1,700. He had been compelled to 
 make new loans to pay the charges on old ones. He was paying 
 half his salary each year to the sharks, and yet this was not all 
 
applying on the debt, for there was a fee each time his note was 
 extended. At this time, when he was fifty-five years old, and 
 the state of his affairs was breaking down his health, his case 
 came to the notice of the Division of Remedial Loans of the 
 Russell Sage Foundation, and its director took the matter to 
 the man's employer. At first the employer's decision was that 
 he would discharge the man, under his rule that any employee 
 dealing with money-lenders should lose his place. He belonged 
 to the large class who thought that borrowing must always be 
 a sign of unthriftiness. He was brought to see the case in 
 another light, however, and in his final decision to help the 
 man in a legal fight to rid himself of his creditors he began the 
 new movement among employers to protect their men from 
 loan sharks. 
 
 CO-OPERATIVE SOCIETIES FOR EMPLOYEES. 
 
 In addition to fostering this new spirit among employers, 
 making them see that they were doing harm by turning their men 
 out into the streets when they were found to have borrowed 
 money, without any investigation of the reasons for the borrow- 
 ing, an important part of the modern constructive campaign is 
 the development of co-operative loan societies among employees 
 themselves. This is one of the most effective ways of dealing 
 with the problem of need for money in emergencies on the part 
 of a man who is dependent on a salary. A great deal of the ex- 
 pense of an ordinary commercial company is avoided in the em- 
 ployees' associations, for the men know each other and the 
 recommendation of a credit committee is sufficient warrant for 
 a loan without the costly investigation of personal cases that a 
 company has to make. The men themselves, contributing to 
 the association and managing it, feel a pride in it, and are able 
 to use it with dignity, while by making it a savings association 
 as well, with an office in the company's building ready at hand 
 when the men draw their pay envelopes, it can be made a power- 
 ful influence for thrift. 
 
 In the lack of such an organization the men are forced to turn 
 to commercial companies of some sort. Recently there has 
 sprung up a movement for industrial loan banks upon a com- 
 paratively new plan, which loan money on endorsed notes and 
 receive a percentage of return which is low in comparison to that 
 which loan sharks ordinarily demand. In general they are 
 
 6 
 
unable to loan money profitably in amounts smaller than $50, 
 however, and consequently they fail to meet the needs of a large 
 class of borrowers, for the average amount asked for is much 
 below that level. Really to defeat the unprincipled operators 
 who are always on the watch to get a grip on the borrower who 
 needs $10 or $20 and run him as far into debt as they can, it is 
 necessary to have agencies making equally small loans at a 
 lower cost. 
 
 It is here that the need for better laws on the business of loan 
 agencies appears. There are eighteen or twenty states which 
 have passed special legislation of various sorts on this question, 
 and within the past year New York and New Jersey have passed 
 full and significant measures dealing with the issue. In New 
 Jersey a license is required and the business is under the super- 
 vision of the Commissioner of Banking and Insurance. The 
 business is done under bond to observe the law, is subject to 
 thorough investigation, and the rate of interest is 3 per cent, per 
 month. For violations a loan becomes void, and the borrower 
 is entitled to recover all sums paid upon it. In New York the 
 business has been put on a basis of 2 per cent, interest per month 
 on all loans less than $200, with certain special fees, and has been 
 brought under the Department of Banking. This bill is now 
 waiting for the Governor's signature, and is expected to receive 
 it shortly.* Other states in which laws have been passed to 
 make less broad and easy the way of the loan-shark are: Con- 
 necticut, Delaware, Michigan, Pennsylvania, Tennessee, Vir- 
 ginia, Wisconsin, California, Ohio, Massachusetts, Montana, 
 Maryland, Mississippi, Rhode Island, Colorado, Oregon, Indiana, 
 Illinois, Maine, Minnesota, Missouri and Nebraska, while Iowa, 
 Texas, Utah, Oklahoma and Kansas have recently been pushing 
 good legislation. The year 1912 was the first to see the actual 
 imprisonment of a convicted loan shark. Since then there have 
 been many, including within the past few months that of one 
 of the most notorious and extensive, operators in the country. 
 
 WHY 2 PER CENT. A MONTH ? 
 
 The attempt of those who have been fighting the loan sharks, 
 however, in which the Division of Remedial Loans of the Russell 
 Sage Foundation has played an aggressive and leading part 
 which has commanded high praise, has not been so much for 
 prosecution as for constructive work on a competitive system. 
 
 ♦Signed April 16, 1914. 
 
They are trying to substitute for the hundreds of per cent, 
 charged in interest by the usurers a charge of from 2 to 3 per 
 cent, a month. It is just at this point that the hands of pubhc- 
 spirited people are usually raised in righteous horror. Three 
 per cent, a month ! Or even 2 ! Twenty-four per cent, a year ! 
 Compared with ordinary business returns on invested capital, 
 which is the comparison they instinctively make, this sounds 
 pretty big. They forget, however, that this money is actually the 
 capital and most of the equipment and working force of the 
 company as well. Out of the returns on it must be paid not 
 only a reasonable dividend and all office expenses, but also 
 heavy expenses in investigation of borrowers' requests as well. 
 A great deal of money must be spent in finding out whether each 
 borrower is what he represents himself to be and has what he 
 represents himself to have, in order to avoid greater losses 
 through bad loans. An instance will make the case clear. The 
 Provident Loan Society of New York, the biggest remedial loan 
 society in the business, with a capital of over $7,000,000, has 
 found that a loan of $250 repaid in two weeks at an interest of Yi 
 of 1 per cent, for that period will just redeem the cost of making 
 the loan and the cost of the capital employed. Fourteen per cent, 
 of all the loans made by this society are redeemed within two 
 weeks. Loans of less than $10 made at a charge of 1 per cent, 
 per month do not pay, even though they are not redeemed until 
 the end of 12 months, so that in general all business in smaller 
 loans is done at an actual loss. 
 
 A study of the field has shown that the average annual op- 
 erating expense of seventeen chattel loan societies was 14.4 per 
 cent, of the average amount outstanding in loans, including losses 
 from unpaid loans. Operating expenses in individual cases vary 
 considerably, according to local conditions. Adding 6 per cent, 
 as a moderate rate of return to the investors on the capital in 
 the business, there is a total of at least 20 per cent, which must 
 be raised on the money loaned. There is the business basis for 
 practical, honest rates. 
 
 The fight is proceeding most encouragingly now. The work 
 of education is bringing results, and loan sharks are taking fright 
 in all parts of the country. All that the sincere workers for 
 reform ask, is the passage of laws which will permit them to 
 start new backfires against the force of devastation which threat- 
 ened at one time most dangerously to sweep the country. 
 
 8 
 
RRANGEMENTS have been made with 
 The Clover Press, Grand and Centre^ 
 Streets, New York City, to furnish 
 complete outfits of the necessary books 
 and forms for Credit Unions, at a 
 total cost of $25 per outfit. All 
 books and forms conform to the suggestions contained 
 in '*A Credit Union Primer " published by the Division 
 of Remedial Loans of the Russell Sage Foundation. 
 
 The supply, which is adequate for a^ Credit Union 
 with a membership of 100, includes the following: 
 
 100 Pass Books (containing model by-laws) 
 
 1 112-Page General Ledger 
 125 Individual Ledger Sheets 
 
 1 Individual Ledger Sectional Post Binder 
 
 1 Cash Book, 200 Leaves 
 125 Certificate of Shares Cards 
 100 Applications for Membership 
 100 Subscriptions for Shares 
 100 Regular Meeting Notices 
 100 Special Meeting Notices 
 500 Deposit Slips 
 100 Applications for Loan 
 100 Promissory Notes 
 50 Statement Forms 
 
 1 Membership Book 
 
 1 Minute Book 
 
 5 1% Interest Tables, printed on Linen Stock 
 
 THE CLOVER PRESS is prepared to furnish outfits for 
 Credit Unions at short notice. 
 
A CREDIT UNION PRIMER 
 
 An elementary treatise on Cooperative Banking, containing 
 questions and answers concerning methods of organization 
 and operation, necessary books and forms, suggested by- 
 laws and the Credit Union Law of New York 
 
 by 
 
 ARTHUR H. HAM 
 
 Director, Division of Remedial Loans 
 
 Russell Sage Foundation 
 
 and 
 
 LEONARD G. ROBINSON 
 
 General Manager, Jewish Agricultural and 
 
 Industrial Aid Society 
 
 Published by 
 
 Division of Remedial Loans 
 
 Russell Sage Foundation 
 
 130 East 22nd Street 
 
 New York City. 
 
Copyright, 1914, by 
 The Russell Sage Foundation 
 
CONTENTS 
 
 Page 
 Introduction 1 
 
 Questions and Answers 13 
 
 Books and Forms ^28 
 
 Organization Certificate 35 
 
 By-Laws * 37 
 
 New York Credit Union Law 68 
 
PREFACE 
 
 For a number of years the Russell Sage Foundation, through 
 its Division of Remedial Loans, has been working to make 
 it more and more possible for people of small incomes who find 
 themselves compelled to borrow money for proper purposes to 
 do so under reasonable conditions. It has tried to put an end to 
 the iniquitous extortions of loan sharks. It has conducted a 
 campaign of exposure through the public press ; in various states 
 it has aid*ed in preparing and securing the enactment and enforce- 
 ment of laws to limit strictly the rates of interest and charges 
 that may be made on small loans ; it has helped in procuring the 
 evidence necessary to ensure the conviction of loan sharks and to 
 obtain adequate hearings in the courts on disputed questions of 
 law. One of its main functions has been to foster the forma- 
 tion in cities of remedial loan associations, whose object is to 
 loan small sums at as low rates of interest and on as easy terms 
 as may be compatible with a fair return on the capital invested. 
 But when the loan shark is eliminated and agencies for loaning 
 money on fair terms are established in all the cities the field will 
 not be covered. An independent commercial agency which works 
 for even a small profit must, in order to keep itself financially 
 sound, carefully scrutinize the security offered to it and the 
 responsibility of applicants for loans. The necessary investiga- 
 tion is costly and the smaller the size of loans, the greater the 
 comparative cost. For this and other reasons such agencies 
 must charge from twice to four times the ordinary commercial 
 rates for loans. Their relations to borrowers are also in the 
 main merely commercial and impersonal. Many persons needing 
 small loans cannot, therefore, afford to use them; nor can they 
 give a borrower helpful advice and supervision as to spending his 
 money. 
 
 In Europe and Canada many associations for saving and 
 loaning on a mutual, cooperative basis have been established and 
 carried on for many years. These associations have been organ- 
 ized to meet the needs of country districts as well as of cities. 
 They are managed by officers and committees selected by the 
 members themselves. These officials usually serve without pay. 
 
Their members being on the same economic plane, are well enough 
 acquainted with each other to judge of the requirements and 
 responsibility of those of their members who wish loans. They 
 also require an applicant to tell the use to which the money will 
 be put and they determine whether it is wise for him to borrow. 
 Not only do they provide for their members a source of 
 loans, but they are able to make very small loans at a low rate 
 of interest and to regulate the time and method of repayment 
 according to the needs of each case. On the other hand, they 
 prevent borrowing for unwise purposes. More important still, 
 they give practice in careful business administration, teach self- 
 government on a democratic basis, and develop a community 
 spirit. "Democracy financing itself is a matter of financial 
 moment not alone for its first service but for the possibility it 
 affords to collective industrial undertakings. In cooperative 
 banking lies a source of enrichment, not only of material wealth 
 but of character, and the education of the common man to the 
 management and investment of a common trust."* 
 
 There is no doubt that cooperative associations are the best 
 agencies for dealing with the problems of small loans as well as 
 those of thrift. It is of real social importance that cooperative 
 loan and saving associations should be widespread. It is un- 
 fortunate that in the United States only a few exist as yet. A 
 most significant move was made by Massachusetts in 1909 when 
 it enacted a law providing for the organization of such as- 
 sociations with legal sanction and supervision under the name 
 of "Credit Unions." This Primer owes much. to the Massa- 
 chusetts law. It has been prepared for the purpose of encourag- 
 ing the formation of similar associations throughout this country 
 and elsewhere, and of showing in detail the various steps, regula- 
 tions and forms that are necessary to proper and sound business 
 management. It is founded on the practice in Massachusetts 
 but its authors have made use of their own experience and of all 
 the information that they could get from other sources to provide 
 the best possible model that can be devised at the present stage of 
 progress. Their work has been most careful, thorough and com- 
 prehensive. They are admirably equipped for such a w^ork by 
 both experience and study. 
 
 *Capitalizing Character by John L. Mathews. Harper's Monthly Magazine. 
 October, 1913. 
 
Ill 
 
 Mr. Ham, as Director of the Division of Remedial Loans 
 of the Russell Sage Foundation, has made a close study of small 
 loan conditions in cities. His six years of work in this field for 
 the Foundation have brought him a great fund of information 
 and experience. To him is due the success that has been achieved. 
 
 Mr. Robinson has been an effective pioneer. As general 
 manager of the Jewish Agricultural and Industrial Aid Society 
 he has for ten years been engaged in making loans to farmers 
 m nearly every state in the union. He has acquired a wide 
 knowledge of rural credit conditions and has succeeded in in- 
 troducing small cooperative loan associations in a number of 
 communities of Jewish farmers in the eastern states. 
 
 Together the authors are largely responsible for the passage, 
 in 1913, of the New York Credit Union Law. Recognizing the 
 futility of a mechanical copying of cooperative credit systems of 
 other countries they have suggested an elastic system which it is 
 believed will prove itself adaptable to varying conditions in vari- 
 ous parts of this country. The Primer will undoubtedly have a 
 wide and important social effect. 
 
 The Foundation is indebted to Mr. Pierre Jay, vice-presi- 
 dent of the Bank of the Manhattan Company and former Bank 
 Commissioner of Massachusetts; to M. Alphonse Desjardins, 
 founder of the Canadian cooperative banking- system; to Mr. 
 George L Skinner, First Deputy Superintendent of Banks of 
 New York, and to others who have given much valuable advice 
 in the preparation of this Credit Union Primer. 
 
 John M. Glenn, 
 General Director of Russell Sage Foundation. 
 
INTRODUCTION. 
 
 THE number of cooperative credit associations or Credit 
 Unions now in existence in all parts of the world has 
 been estimated to be more than 65,000, with a mem- 
 bership approximating 15,000,000 and an annual business 
 amounting to $7,000,000,000. 
 
 Impressive as these figures are, they are less striking than 
 the economic and social results which this form of coopera- 
 tion has achieved wherever it has found a foothold. It has 
 regenerated and accelerated agriculture, commerce and in- 
 dustry. It has stamped out usury and raised millions of 
 human souls from the depths of despair to lives of hopeful- 
 ness and service. It has supplanted shiftlessness by industry ; 
 improvidence by thrift; intemperance by sobriety; selfishness by 
 neighborliness ; individual effort by concerted action — in fact, 
 has proved to be one of the most potent moral, educational, and 
 social forces in the history of civilization and in the enrichment 
 of the life of the common people. 
 
 Credit unionism originated in Germany in 1849. Fred- 
 erick William Raiffeisen and Franz Hermann Schulze-Delitzsch 
 were the founders of the two systems of cooperative credit 
 which are commonly known as the Raiffeisen system and the 
 Schulze-Delitzsch system, respectively. All cooperative credit, 
 wherever found, is patterned after one of these two systems. 
 
 The United States Commission, which recently made an 
 investigation of rural credit in Europe, reports the number 
 of Raiffeisen banks in Germany on January 1, 1910, as 14,993 
 with a membership of 1,447,766. The loans outstanding on that 
 date aggregated $452,749,961. The Commission estimates the 
 total number of such banks in existence to-day in Germany to 
 be 17,000 with a membership of 1,700,000. In 1911 the number 
 of Schulze-Delitzsch banks was 1,051 with a membership of 
 671,589. Their total loans to members during that year reached 
 the huge sum of $1,106,165,207. 
 
 Italy was the second country to adopt the Credit Union. 
 Ex-Premier Luzzatti introduced a modified Schulze-Delitzsch 
 system into Italy in 1866 by creating the People's Banks, while 
 Dr. Leone Wollemborg is responsible for the creation, in 1883, of 
 Italian Rural Banks on the Raiffeisen plan. Austria followed in 
 
1885. Ireland, under the inspiring leadership of Sir Horace 
 Plunkett, has to-day over 200 cooperative banks. Cooperative 
 credit was introduced into France in 1892. Russia has its 
 Credit Unions; so has India. In 1909 Japan had 1,886 Credit 
 Unions v^ith a membership of 170,000. 
 
 In Canada the first Credit Union was founded in 1900 by 
 Alphonse Desjardins, in the town of Levis, Province of Que- 
 bec. Through his enthusiasm, energy and self-sacrifice, over 
 150 Credit Unions have been formed and are in successful 
 operation in the Canadian Provinces.* Credit Unions of various 
 types are also known to exist in many of the countries of 
 South America. 
 
 The wedge of credit unionism was driven into the United 
 States by the enactment of the Massachusetts Credit Union 
 Law in 1909. Since then legislation has been enacted in New 
 York, Wisconsin and Texas. The Bank Commissioner of 
 Massachusetts reported in 1913 the existence of 34 Credit 
 Unions in urban communities in that state with a membership 
 of 4,529 and a share capital of $120,284.48. They loaned to their 
 members during that year a total of $146,740.53. 
 
 The first Credit Union to organize under the New York 
 law was the Speedwell Credit Union formed by the employes 
 of the real estate firm of Bing & Bing, in New York City. 
 This Union, formed in January 1914, has already obtained a 
 membership of nearly 200 and has accumulated assets of 
 $15,000. 
 
 The first, and so far the only, Credit Unions to be formed 
 am.ong farmers in the United States were those organized by the 
 ""ewish Agricultural and Industrial Aid Society of New York, 
 ^^nder the spur of necessity and without waiting for legislative 
 or other aid, that Society has organized 18 Credit Unions 
 since 1911 — eight in New York, five in New Jersey, four in Con- 
 necticut, and one in Massachusetts. On September 30, 1913, 
 they reported a membership of 547 and a total capital of $9,665. 
 They had then been in operation for periods averaging about 13 
 n^nni-hs. during vv^hich time they loaned to their members 
 $73,624.66, or eight times their capital. Although they charge 
 
 *A detailed account of the operations of the Canadian Credit Unions will be 
 found in The Cooperative People's Bank by M. Alphonse Desjardins, N. Y. 
 Russell Sage Foundation, Division of Remedial Loans, 1914. 
 
only six per cent, annual interest upon loans tlieir net profits 
 up to that time aggregated $1,317.93 or at the rate of 13>^ 
 per cent, per annum on their capital. 
 
 However valuable the record of these Credit Unions may 
 be as showing the possibilities of credit unionism in urban 
 and rural communities and their adaptability to American 
 conditions, it must be confessed that the figures taken by them- 
 selves look pitifully small and insignificant when compared with 
 those of other countries. 
 
 Under present conditions in many parts of the United 
 States if the farmer needs new machinery, live stock, draft 
 animals or supplies to enable him to live until the time of re- 
 turns from the harvest, he must buy upon credit at the deal- 
 ers' prices or mortgage his farm. The absence of adequate 
 credit facilities in some sections is one of the greatest draw- 
 backs to the development of the land. 
 
 The need of better credit facilities for the small tradesman 
 to enable him to conduct his business more efficiently and 
 for the wage-earner when he meets reverses, sickness or other 
 urgent need, is fully demonstrated by the pernicious activity 
 of the loan shark. One has only to glance at the records 
 of small loan agencies to be convinced that by far the greater 
 part of loans made, while they may be the indirect result of 
 improvidence, are due to wants that are real and pressing. 
 Not only is small borrowing often a legitimate and de- 
 fensible procedure occasioned by emergency needs that lay a 
 heavy hand upon the wage-earner but it frequently is a pru- 
 dent act committed in the spirit of economy. It enables a man 
 to buy in large rather than small quantities or for cash 
 instead of upon the credit plan, which allows the instalment 
 agency to reap an unconscionable profit at his expense. With 
 the marked progress made by credit unionism abroad before it 
 the United States is just beginning to grasp the significance of 
 this world movement while its agriculture suffers from the lack 
 of adequate credit facilities, and the usurer grows rich in its 
 cities. 
 
 Is it not remarkable that while we have given to the world 
 an object lesson in political, civic and religious cooperation, 
 we should have to look to other countries for inspiration and 
 guidance in economic cooperation? Not that we are destitute 
 
of economic cooperation — many cooperative enterprises both 
 urban and rural have been launched in this country w^ith a 
 fair measure of success. True, their death rate has been high, 
 but the student of European cooperation knows that even there 
 failures have been numerous. 
 
 Has the adoption of the Credit Union by this country 
 been delayed because its functions are already performed by 
 other institutions? If so, an attempt to add it to our complex 
 financial machinery would be worse than useless. What are the 
 agencies now in existence which make small loans and encourage 
 savings, and how well do they fill the place of the Credit Union? 
 
 The great contribution of the United States to cooperative 
 credit is the building and loan association. In August, 1913, 
 there were over 6,200 local building and loan associations 
 with a total membership of more than 2,500,000. Philadelphia 
 alone has 1,000 associations with a membership of 475,000 and 
 assets of over $200,000,000, making loans of $500,000 each 
 week. The remarkable growth and phenomenal success of 
 these institutions are the object of envy of European co- 
 operators. In providing opportunity for home building they 
 are performing a function of prime importance, but they do 
 not supply that urgent, short-term personal credit which means 
 so much to the man in need; and they cannot enter this field 
 for their loans must be secured by real estate mortgage or 
 shares, the paid-up value of which exceeds the amount of the 
 loan. 
 
 The remedial loan associations, which have come into 
 existence during the last few years, furnish a satisfactory source 
 of credit for the man who has personal property to pledge or 
 mortgage. There are now 36 in the United States with 
 a combined capital of over $12,000,000, and their number is 
 rapidly increasing. They are usually joint stock companies formed 
 not primarily for gain but to provide small loans to deserving 
 borrowers at rates sufficient to pay the operating cost and a 
 limited return upon the invested capital.* They can justly lay 
 
 *A unique form of organization is that of the Provident Loan Society of 
 New York, the largest remedial loan agency in the United States. The Society 
 was formed in 1894, as the result of efforts initiated by the Charity Organization 
 Society of New York, to do a general pawnbroking business. It was incorporated 
 under special act of the legislature as a membership corporation. Its capital, which 
 now amounts to $8,000,000, consists of $2,000,000, 4^% gold bonds and 
 $6,000,000, certificates of contribution upon which interest not exceeding 6% per 
 annum is paid. Membership in the corporation is limited to 100. The Society's 
 
claim to considerable educational work and many of their bor- 
 rowers are benefited morally as well as materially by contact 
 with them. They are doing a meritorious work and by their 
 competition are rapidly forcing the loan sharks in many cities 
 to reduce their rates or discontinue operations, but on ac- 
 count of their business-like requirements their field is nec- 
 essarily limited. They cannot loan to the man who does not 
 possess the required security and because of their impersonal 
 character they cannot effectively attempt to encourage bor- 
 rowers to become thrifty in order to provide in advance for 
 the emergencies which led to their distress. 
 
 For most people a savings bank account is the first step 
 in accumulation. The present amount of deposits in savings 
 banks, savings departments of national and state banks and 
 trust companies, and postal savings banks cannot be less than 
 $7,000,000,000. Two and a half billion dollars is held by the 
 mutual savings banks of New York, Massachusetts and Con- 
 necticut alone. That the savings banks have played an important 
 part in promoting thrift is beyond question and their appeal 
 has been considerably strengthened in the last year or two by the 
 introduction of the "Christmas club" or "thrift club" plan under 
 which regular weekly deposits, beginning with a few cents and in- 
 creasing throughout the year, are accepted. At the end of the 
 year the accumulated sum is returned to the depositor with small 
 interest and may be deposited by him in a regular savings ac- 
 count. The plan was employed last year by 1,000 banks, mostly 
 in towns and small cities, which collected in this way over 
 $40,000,000. The forerunner of the "Christmas Club" was the 
 Penny Provident Fund, organized by the Charity Organization 
 Society of New York in 1889 to receive savings of from one 
 cent upward. Deposits are receipted for by stamps attached to 
 a stamp card. No interest is paid upon deposits, but when a 
 few dollars have been saved depositors are invited to open ac- 
 counts in a savings bank where interest may be earned. More 
 than 250 branch offices or stamp stations have been opened in 
 
 certificates are becoming more widely held each year and are increasingly used 
 as investments for philanthropic and educational institutions. There are now about 
 700 holders. Trustees of the Society receive no compensation for their services and 
 no certificate holder may hope to receive any profit other than legal interest upon 
 his contributions even in the event of dissolution, for surplus profits, which amounted 
 on December 31, 1913, to $1,075,348, exclusive of real estate costing about $1,250,000, 
 are an indivisible reserve and are to be distributed among charitable institutions 
 at the discretion of the trustees. 
 
New York and other cities in and out of the state. By en- 
 couraging small savings, particularly among children, the Fund 
 has developed into a thrift agency of considerable importance. 
 But in spite of the enormous growth of the fiscal agencies which 
 aid people to become thrifty, it is apparent that the appeal to 
 the thrift instinct has not yet been heard by thousands of people. 
 
 Thrift is hardly to be termed one of the cardinal virtues 
 of the native-born American, for he sees his immigrant fellow- 
 citizen live in comfort on a wage that means deprivation for 
 him. Many American wage-earners, who are now constantly 
 borrowing from loan sharks at interest rates running as high 
 as 500% per annum, would if accustomed to thrift be re- 
 habilitated. Surely the man who can pay such charges out of in- 
 come could, if so inclined, put aside a regular if small amount 
 each week or month in provision for emergencies. Why has he 
 not done so ? It is because real thrift depends upon something be- 
 sides the existence of a safe depository for surplus funds. In 
 order to be thrifty many a man requires something more than 
 agencies to receive his deposits and return them to him, when 
 needed, intact with interest: he requires an agency which will 
 make its hours of business conform to his convenience, which 
 is conveniently located, which does not require him to stand 
 in line for a long time awaiting his turn at the expense of 
 his lunch hour and possibly of some of his employer's time : he 
 requires an agency to which he is not ashamed to bring a 
 dollar, fifty cents or even a quarter; an agency which once 
 he has associated himself with it will constantly remind him 
 of his resolution to save and which will reward his thrift by 
 extending credit to him upon easy terms of repayment se- 
 cured solely by his character and personal worth — credit which 
 will enable him to effect economies in purchasing and em- 
 bark in productive enterprises, and will protect him from the 
 usurer. 
 
 This is the field of the Credit Union. By its proximity 
 and convenience it persuades the man who has not been reached 
 by the savings bank to become thrifty, and this without in- 
 terfering with the growth of ordinary banking institutions — 
 instead it actually increases the field of the banks. It makes 
 the accumulated capital available to the persons who assisted 
 in its accumulation. It does not become a substitute for the 
 
building and loan association or the remedial loan society; 
 instead it becomes a complement of these agencies, for the 
 basis of the security for its loans is not collateral but character. 
 
 Character is a recognized form of security. Most 
 borrowers possess such security and are entitled to credit upon 
 this basis, but to ascertain the credit to which they are en- 
 titled requires a more or less intimate knowledge of their 
 personal habits and of their financial and domestic situation. 
 The customer of the commercial bank who desires a loan must 
 furnish a statement of his assets and liabilities and information 
 upon the following points : annual business done and profits made ; 
 relation of rent, salaries and overhead charges to gross profit; 
 why the loan is desired ; whether previous loans have been obtained 
 and why; and the number, kinds, and wages of employes. This 
 information is supplemented by inquiries, through credit reporting 
 agencies and the bank's own investigators, into the personal habits 
 of the prospective borrower, his mode of living, his position in the 
 community, the appearance of his place of business, the service 
 which he renders his customers, the amount of advertising which 
 he does, the manner in which he settles his accounts, his reputa- 
 tion in the market from which he secures goods and supplies, the 
 amount of his debts and of his quick assets. 
 
 Similarly, an intimate knowledge of the personal char- 
 acter and responsibility of the borrower of $25 or $50 must 
 be obtained before a loan can safely be made to him. Such 
 knowledge can be obtained by a commercial lending agency in 
 a large city only at an expense which is prohibitive when either 
 legal restrictions or the value of the money to the borrower are 
 considered. Consequently such agencies making small loans of 
 necessity require collateral security and, regardless of the need 
 and apparent honesty of the applicant, cannot safely loan to him 
 unless he can furnish personal property or other security in pledge 
 or mortgage. 
 
 Credit Unions are formed on the principle that a man's 
 best asset is his own associates' estimate of him. Their 
 advantage is obvious. They are composed of a small homo- 
 geneous membership, mutually acquainted. Only those known 
 to be honest and industrious are admitted to membership 
 and loans are made only to such members as have a legitimate 
 need for the money. The loan is further safeguarded, if of a 
 
8 
 
 considerable size, by the endorsement of one or more feliow- 
 members. Thus the cost of investigation to which the com- 
 mercial lending agency is committed is largely eliminated and the 
 abundance of security supplied is sufficient to attract savings 
 deposits from members and enable the Credit Union to borrow- 
 when necessary on favorable terms from outside sources of 
 capital. Cooperation therefore brings credit facilities within the 
 reach of those who individually could not obtain them. Losses 
 are reduced to a minimum, because each member is interested 
 in every loan and the danger of a member defaulting or 
 neglecting his obligations is decreased, not only because he is 
 under the surveillance of other members, but because he knows 
 that his fellow members would suffer. He is therefore not so 
 likely to default in his payments as if he were dealing with an 
 impersonal corporation or a philanthropic institution. As 
 directors and committee members serve without compensation, 
 the operating costs are confined to the cost of books and stationery, 
 with sometimes, in the case of large Credit Unions, an honorarium 
 to the person in active charge of the business. 
 
 The Credit Union is the simplest form of cooperation 
 and its operations are less intricate than the daily activities 
 of the average farmer or housewife. Its success depends not 
 so much upon the business ability and acumen of its members as 
 upon their honesty and thrift, their willingness to assume per- 
 sonal responsibility for and to act in sympathetic association 
 with their fellows. 
 
 In details Credit Unions differ somewhat in the various 
 coimtries in which they have been formed. The Raiffeisen 
 association places no importance upon share capital and obtains 
 its funds by deposits and loans from outside sources through 
 the unlimited liability of members. Wherever the law requires 
 the issuance of shares they are of nominal value. After the 
 usual dividends are paid from such profits as accumulate, the bal- 
 ance is turned into an indivisible reserve fund. The purpose 
 of the Raiffeisen association is to obtain loanable funds from 
 any source for the aid of its members and members join for the 
 sole purpose of obtaining credit. 
 
 The Schulze-Delitzsch organization aims chiefly to stimulate 
 thrift among its members. At first associations of this type were 
 
formed upon the basis of unlimited liability, but many have since 
 departed from that practice. A large proportion of their funds 
 consists of withdrawable shares which have a much higher value 
 than in other types (minimum, $30). Dividends are paid upon 
 shares and in most instances the management is in the hands 
 of paid officers. Like the Raiffeisen association deposits are 
 accepted from non-members. 
 
 The Luzzatti banks of Italy issue instalment shares of 
 small value, the liability of each member being limited as a rule 
 to a few times his holdings. As in Germany, the cooperative 
 banks of Italy receive deposits from all who come. The Raiflfeisen 
 associations are more or less assisted by the government but the 
 Italian banks are independent of government aid. 
 
 The Canadian cooperative banks more nearly resemble the 
 Italian type than the German types. The moderate-priced share 
 with limited liability is used effectively in securing funds. Shares 
 are payable in instalments and dividends are paid annually. 
 Strong indivisible reserves are accumulated which, upon dissolu- 
 tion, are to be devoted to some work of public utility. Unlike 
 the Italian and German banks the Canadian associations deal 
 only with members. Their founder believes that no government 
 aid should be accepted except in the nature of liberal laws. Ex- 
 penses of operation are small as the manager alone receives 
 compensation. Committee members who have charge of loans 
 may not borrow. The tendency to allow undeserved credit to 
 officers in European associations led the Canadian banks to 
 prohibit the practice entirely. The Quebec statute (the only law 
 authorizing cooperative credit associations in Canada) insists 
 upon local control, permitting no branch system or centralization, 
 which is a distinctive feature of the movement in Europe. 
 
 The type of Credit Union herein proposed resembles the 
 Canadian type in many particulars. Deposits are accepted from 
 and loans made to members only. The shares are withdrawable, 
 of small value, payable in instalments and are to receive 
 dividends. A reserve is to be built up from profits, fees and fines. 
 Liability of members is limited to the amount of shares which 
 they own or to which they have subscribed. LInlike the Canadian 
 associations however they may make loans to officers and com- 
 mittee members upon the approval of a majority of all the mem- 
 
10 
 
 bers and the reserve fund may, in the case of dissolution of the 
 Credit Union, be divided among its members. Volunteer serv- 
 ice is to be relied upon for the conduct of affairs except in the 
 case of large Credit Unions where a nominal compensation is 
 recommended for the treasurer or other executive officer. 
 
 The observer of the wonders that have been wrought by 
 Credit Unions among farmers and wage-earners abroad should 
 not fall into the error of believing that it is cheap credit alone 
 that is responsible. An essential condition of any system of 
 credit for any class is fair and adequate responsibility and 
 the important thing about the Credit Union is that it is con- 
 trolled and operated by the members in their own interests, 
 that it deals only with its members and each is responsible for 
 its success or failure. It is important that small borrowers 
 should be able to obtain loans without undue difficulty and at 
 a low interest rate, but this does not justify the suggestion of 
 governmental loans in this field which would substitute 
 paternalism for initiative and self-help. 
 
 The Credit Union not only inculcates and stimulates the 
 habit of making small savings and renders the capital thus 
 accumulated available to those who assisted in its accumulation 
 but, to quote M. Desjardins : "It teaches its members how capital 
 is managed, safeguarded and multiplied by useful employment ; it 
 teaches business methods, self-government and self-reliance and 
 thereby makes its members better citizens; it transforms moral 
 qualities into valuable assets and brings to the industrious and 
 thrifty man a higher reward than wages — the confidence of 
 his fellow-citizens." 
 
 Surely there is room in this country for such a beneficent 
 agency. It is frequently said that the United States offers an 
 unfavorable field for the Credit Union for the reason that 
 Americans are strongly individualistic and incapable of 
 cooperative endeavor and also because of the instability of their 
 occupations and residence. But no country has ever wanted it at 
 first or felt that its own peculiar conditions furnished a favorable 
 field. Fixity of population is desirable for the formation and suc- 
 cessful operation of Credit Unions and there is reason for believ- 
 ing that a large part of our population has the fixity necessary for 
 such purposes. The brief experience already gained in the United 
 
11 
 
 States indicates that the desired elements are to be found in 
 agricultural districts; in labor, religious and fraternal organiza- 
 tions; and in industrial and mercantile establishments.* 
 
 Though Credit Unions should stand upon their own feet and 
 receive no benevolent assistance from governmental or other 
 sources, it is important that the state should protect them by 
 enacting constructive laws requiring them to organize under the 
 supervision of a competent authority and to operate in accordance 
 with principles that have proven to be safe and wise. 
 
 The employer who realizes the evil effects of the loan 
 shark system, which saps the moral fibre of his men, may assist 
 by ceasing to discharge men who have borrowed money upon 
 their wages. Such a custom accomplishes nothing except to 
 make employes preferred risks for the loan shark, for it gives 
 him an additional hold upon them. The employer should en- 
 courage his employes to form Credit Unions which, owned and 
 managed entirely by themselves, will cultivate self-respect and 
 knowledge of business methods and will become powerful 
 agencies for thrift and efficiency. 
 
 The questions and answers, instructions, by-laws, forms 
 and records which follow are intended to serve as a guide to 
 persons who desire to form Credit Unions. There is no reason 
 why the plan suggested should be adopted in detail if peculiar 
 circumstances suggest modifications, for the Credit Union has 
 a wide range of adaptability. The type is not of great im- 
 portance provided the fundamental cooperative principles are 
 adhered to. 
 
 *In addition to the Credit Unions already in successful operation here, there 
 have been formed among the employes of many large corporations in recent years 
 associations of various types designed to encourage thrift and extend credit based 
 largely upon character. Though there are among many of these agencies varying 
 degrees of difference from the fundamentals of the Credit Union in respect ^ to 
 democracy of administration and equality as to profits, they afford convincing 
 evidence of the availability of the field for the Credit Union. Among the most 
 successful of these agencies and those most nearly resembling the Credit Union are 
 the Savings and Loan Association of the Celluloid Co., Newark, N. J., and the 
 Deposit and Loan Bureau of William Filene Sons' Co., Boston, Mass. Another 
 successful agency is the Mutual Investment Association of the Postal Telegraph 
 Company. 
 
 For a detailed account of the operations of these and similar agencies, see 
 "Remedial Loans — A Constructive Program" (By Division of Remedial Loans, 
 Russell Sage Foundation, January, 1912), and Marcosson, I. F., "The Wage 
 Earner as an Investor" (In Saturday Evening Post, pp. 10-12, 33-34, April 25, 1914). 
 
13 
 
 QUESTIONS AND ANSWERS. 
 
 What is a Credit Union? 
 
 A Credit Union is a cooperative association whose objects 
 
 are 
 
 1. To promote thrift among its members. 
 
 2. To provide its members with credit facilities. 
 
 What are the functions of a Credit Union? 
 
 1. It encourages thrift by providing a safe, convenient 
 and attractive medium for the investment of the savings of 
 its members through the purchase of shares and the making 
 of savings deposits. 
 
 2. It promotes industry by enabling its members to bor- 
 row for productive and other beneficial purposes. 
 
 3. It eliminates usury by providing its members, when 
 in urgent need, with a source of credit at reasonable cost, which 
 they could not otherwise obtain. 
 
 4. It trains its members in business methods and self- 
 government, endows them with a sense of social responsibility, 
 and educates them to a full realization of the value of co- 
 operation. 
 
 What are the basic principles of cooperative credit or credit 
 unionism? 
 
 The principles of credit unionism are: 
 
 1. Equality. All members share equally in privileges 
 and ratably in profits. 
 
 2. Democracy. The one-man-one-vote principle is funda- 
 mental. Each member has but one vote irrespective of the 
 number of shares he may hold. ^ oi{cff^{ * 
 
 IvKere and by whom may a Credit Union be organised? 
 
 Any number of persons may combine to organize a 
 Credit Union, in a city, town or rural community. In states 
 that have Credit Union legislation a certain number of the 
 incorporators must be citizens of the United States and of the 
 state. Where a Credit Union is organized as an unincorporated 
 or voluntary association this is not necessary. 
 
14 
 
 What must be the basis of membership in a Credit Union? 
 
 The basis of membership in a Credit Union must be some 
 common bond or community of interest. This may take a 
 number of forms. It may be a neighborhood. It may be 
 common occupation, employment by the same establishment or 
 membership in the same church, club, lodge, labor union or other 
 organization. In rural communities the church, parish, school 
 district or local grange furnish a satisfactory foundation for 
 membership. 
 
 What should bJ the qualifications for membership? ^lACf'-^ 
 ,t. Identification with the basic unit upon which the Credit 
 Union is founded — the church, the club, the business establish- 
 ment, etc. 
 
 2. Good moral character and a reputation for honesty, 
 sobriety and industry. 
 
 Should membership be limited? 
 
 Any limitation of membership within the group adopted as 
 the basic unit is wrong in principle. It creates close corporations 
 and cliques. It violates the cardinal rules of cooperation and 
 credit unionism. 
 
 Is the large or the small Credit Union to be preferred? 
 / The small Credit Union has many advantages over the 
 ' large. One advantage lies in the intimacy among members which 
 enables them to know one another's character, reputation and 
 needs, and tends to increase the safety of the loans. Another 
 advantage is the encouragement given each member to take an 
 active interest in the management of the Credit Union. 
 
 How may a small Credit Union be organized within a large 
 group? 
 
 Large numbers of men employed in one establishment or 
 organization are usually divided into departmental or divisional 
 groups. These groups may be taken as the basic units for the 
 organization of Credit Unions. This is true of department stores, 
 railroads and most establishments in which large numbers are 
 employed. These groups may be federated to good advantage, 
 but the individual Credit Union should not be so large as to 
 become unwieldy. The smallest workable unit is about 25. 
 
15 
 
 What constitutes the capital of a Credit Union? 
 The capital of a Credit Union consists of the funds paid 
 in upon shares by members and unpaid dividends credited thereon. 
 
 Should the issue of shares be limited? 
 
 There should be no limit to the issuance of shares by a 
 Credit Union in order that new members may be admitted at 
 any time and that old members may have an opportunity to 
 buy additional shares. 
 
 Should the number of shares that may he held by one mem- 
 ber he limited? 
 
 As each member has but one vote no member or minority 
 group of members can control the Credit Union, but it is possible 
 for one or more members, if allowed to hold a large proportion 
 of the shares, to influence unduly the policies of the Union. For 
 this reason it may be wise to place a reasonable limitation upon 
 the number of shares that each member may hold. 
 
 What should he the par value of a share? 
 
 It is desirable to fix a low par value of shares so that 
 no eligible person shall be deprived of membership and that no 
 member shall be deprived of the full privileges of membership. 
 A par value of $5 is recommended. Members should be en- 
 couraged to purchase from time to time as many shares as they 
 can afford. 
 
 Should shares he issued on the instalment plan? 
 
 It is important to provide for payments on account of shares 
 in weekly or monthly instalments, especially if the par value 
 of the shares exceeds $5. 
 
 Should an entrance fee he charged? 
 
 It is advisable to charge an entrance fee : 
 
 1. In order to defray the organization expenses of the 
 Credit Union without impairing its capital. 
 
 2. In order to enable the Credit Union the more readily 
 to accumulate a substantial reserve fund. 
 
 3. In order to make provision for the admission of new 
 members upon an equitable basis when the book value of shares 
 is in excess of their par value. 
 
16 
 
 What should be the amount of the entrance fee? 
 
 The entrance fee should be nominal. A minimum of $0.10 
 a share is recommended on the basis of a par value of $5. This 
 fee may be variable and should be determined annually. 
 
 Should shares he transferable? 
 
 Preferably, shares should not he transferable. But if the 
 Credit Union so chooses, shares may be transferred from one 
 member to another, upon the payment of a transfer fee which 
 should be fixed in the By-Laws. It is advisable to create such 
 restrictions as will discourage frequent transfers. 
 
 Should shares be withdrawable? 
 
 Since shares cannot be transferred, except to members, and 
 then only under certain restrictions, they should be made with- 
 drawable at any time under the following conditions: 
 
 1. Thirty days' written notice of intention to withdraw. 
 
 2. Withdrawals to be paid in the order of their filing and 
 as funds therefor become available. 
 
 3. A member who has filed notice of his intention to with- 
 draw to exercise no privileges of membership, although his shares 
 continue to participate in profits until redeemed. 
 
 4. A withdrawing member should be entitled to the book 
 value of his shares. 
 
 What funds in addition to its capital may a Credit Union 
 have? 
 
 In addition to the funds realized from the sale of shares to 
 its members, a Credit Union may also accept the savings de- 
 posits of its members and may borrow from members and others. 
 
 Why should deposits he accepted? 
 The reasons for accepting deposits are : 
 
 1. To provide members with a mediimi for saving on a 
 preferred and therefore a safer basis than shares and on a 
 slightly more remunerative basis than deposits in ordinary sav- 
 ings banks. Shares represent periodic savings for distant ex- 
 penditures; deposits are regular or irregular savings for more 
 immediate needs. 
 
 2. To provide additional funds in order that more liberal 
 credit facilities may be extended to members. 
 
17 
 
 What rate of interest should be paid on deposits? 
 
 The rate of interest paid on deposits may be variable and 
 should be fixed at regular intervals. It should not, however, 
 exceed by more than one per cent, per annum, the rate paid 
 by the savings bank in the vicinity.* Deposits should draw in- 
 terest from the beginning of each calendar month, but interest 
 should be paid quarterly. 
 
 When should a Credit Union horrozv? 
 
 The reason for borrowing by a Credit Union is to enable 
 it to meet the credit demands of its members. Borrowing is an 
 emergency measure and should be employed only when absolutely 
 necessary. Where Credit Union legislation exists, the borrowing 
 power is regulated by law, but the conditions under which a 
 Credit Union may borrow should always be set forth explicitly 
 in the By-Laws. It is best to leave all borrowing to the decision 
 of the members at a general meeting who should authorize each 
 loan before it is made. 
 
 How should the funds of a Credit Union he employed? 
 
 Except for the Guaranty Fund, which the law may require 
 to be invested in a particular manner, the funds of a Credit 
 Union are primarily to be used for the purpose of making loans 
 to members. Surplus ftmds should be deposited in banks or in- 
 vested in prime securities.^^^ 
 
 Who may borrow? 
 /All members in good standing, with the exception of the 
 Board of Directors, Officers, and members of the Credit Com- 
 mittee and Supervisory Committee, should be eligible to borrow. 
 Though members alone may borrow, the single share which a 
 member must hold is of nominal value. The requirement there- 
 fore involves no hardship. 
 
 Should Directors, Officers, and members of Committees be 
 allowed to borrow? 
 
 In Massachusetts this is expressly prohibited by law. In 
 New York it is permitted under certain conditions. As a gen- 
 
 *It should be borne in mind that the depositor is also a shareholder and, as 
 such, participates in profits realized by the Credit Union. After setting aside a 
 portion to the Reserve Fund, profits are distributed among the shareholders as 
 dividends. 
 
18 
 
 eral rule, it is advisable to elect officers who can do without 
 loans, if the Credit Union is large enough to permit of this being 
 done. Otherwise, it is well, if the law permits, to make provision 
 in the By-Laws for such loans to be made with the approval of 
 the members at a general meeting. 
 
 For what purposes should loans he granted? 
 
 Credit may serve a useful purpose or it may do harm. It 
 is a fundamental principle of credit unionism that loans shall 
 benefit and not injure the borrower. Furthermore, a loan 
 that is of no benefit to the borrower is likely to be an 
 unsafe investment. It is essential, therefore, that a Credit 
 Union should loan only for productive purposes, purposes 
 that will eflFect a saving, supply an urgent need or that will other- 
 wise prove of benefit to the borrower ; that the purpose of a loan 
 be known and approved before it is made. For that reason ap- 
 plications for loans should be made in writing and should state 
 specifically the purpose for which the money is needed. 
 
 ^ — 
 
 Should loans he limited in amount? 
 
 It is well to limit the amount of the loans to each member 
 for the sake of safety, and in order that the funds available for 
 loans may be equitably distributed among members. The maxi- 
 mum amount of the loan may bear some relation to the capital 
 of the Credit Union or may be a fixed sum. There is no necessity 
 for a minimum. On the contrary, smallj rather than large loans 
 should be encouraged. 
 
 What rate of interest should he charged on loans? 
 
 As a matter of principle the interest charged on loans should 
 be no greater than is required to pay the operating cost, a 
 moderate rate of interest on deposits, to provide for a reasonable 
 reserve or guaranty fund, and to pay a moderate dividend on 
 shares. It is well to fix the maximum interest rate in the By- 
 Laws. This rate should as nearly as possible approximate the 
 banking rate of interest. In New York the maximum rate of 
 interest that a Credit Union may charge is 12% per annum. Care 
 should be taken that the total charges upon loans do not exceed 
 the maximum allowed by law. 
 
19 
 
 What should be the maximum length of time for which loans 
 are made? 
 
 The By-Laws may fix a general maximum, but the time of 
 individual loans should Be fixed by the Credit Committee with 
 due regard for the nature of the employment in which the mem- 
 bers are engaged, their ability to repay, and the objects for which 
 loans are made. A maximum of one year should be sufficient 
 even though it may be necessary at the expiration of that time 
 to renew a portion of the loan. 
 
 How should loans he repaid? 
 
 Loans should be repaid in weekly or monthly instalments 
 or in a single sum. This is to be determined in each instance 
 by the Credit Committee. 
 
 How are loans secured? 
 
 Ordinarily the security that a Credit Union demands for 
 loans is the promissory note of the borrower with one or more 
 endorsements, supplemented by a lien upon the borrower's 
 shares and deposits in the Credit Union. The requirement of 
 endorsements may be waived in some cases if the loan is for a 
 small amount. Large loans may also be made to members upon 
 security of mortgage of real or personal property, but unless the 
 Credit Union has an abundance of funds, preference should be 
 given to the smaller loans. 
 
 Who may endorse? 
 
 As a rule members only should be accepted as endorsers. 
 In exceptional cases non-members may be permitted to endorse 
 for members. In either case the endorsers must be acceptable 
 to the Credit Committee. 
 
 Is such security ample? 
 
 As the plan upon which Credit Unions are organized pro- 
 vides a basis of acquaintanceship and knowledge of each mem- 
 ber's character and reputation, it is assumed that no loan will 
 be made until the Credit Committee is possessed of all necessary 
 information regarding the borrower and his endorsers, and the 
 purpose of the loan. The mutual responsibility of members 
 and their self-interest will cause such watchfulness over loans as 
 to make the possibility of loss remote. This has been the uniform 
 experience of Credit Unions. 
 
20 
 
 May additional security he required? 
 
 The Credit Committee may, if it deems it necessary, require 
 additional security upon any loan in the form of additional 
 endorsements, a mortgage or other collateral. 
 
 What income has a Credit Union? 
 
 A Credit Union has two kinds of income : 
 
 1. Reserve income. 
 
 2. Ordinary income. 
 
 What is the reserve income? 
 
 The reserve income consists of entrance or initiation fees, 
 transfer fees, fines, and similar forms of income which do not 
 appear in the profit and loss account, but which, after the pay- 
 ment of organization expenses, are carried directly to the 
 Guaranty Fund. 
 
 What is the ordinary income? 
 
 The ordinary income consists of interest received on loans 
 and income from investments or deposits made by the Credit 
 Union. The ordinary income constitutes the gross profits of 
 the Credit Union. 
 
 What are the net profits? 
 
 The net profits consist of the gross profits after deducting 
 interest paid or accrued and unpaid on loans and deposits, ex- 
 penses, and losses."^ 
 
 How are net profits distributed? 
 
 The net profits of a Credit Union are distributed as follows : 
 
 1. A certain percentage is set apart to the Guaranty Fund. 
 This percentage is fixed by law where Credit Union legislation 
 exists, otherwise it should be fixed in the By-Laws. Generally 
 25% is set aside in this way until an adequate Guaranty Fund is 
 accumulated. 
 
 2. Such part of the balance as may be decided upon may 
 be distributed as dividends among the shareholders. 
 
 3. The balance remaining is carried as surplus, or undivided 
 profits. 
 
 •Under the New York law losses may be charged to the Guaranty Fund so 
 that only when losses exceed the Guaranty Fund need they be deducted from gross 
 profits. 
 
21 
 
 What is the purpose of the Guaranty Fund? 
 
 The Guaranty Fund provides protection for depositors and 
 other creditors of the Credit Union as well as protection for 
 shareholders in the event of losses. The Guaranty Fund is the 
 property of the Credit Union and no share in it may be claimed 
 by any member except upon the dissolution of the Credit Union, 
 
 When are dividends declared? 
 
 Dividends, as a rule, are declared annually at the end of the 
 fiscal year. 
 
 Should the rate of dividends be limited? 
 
 Credit Unions organized in states which have not definitely 
 limited the charges upon loans to a reasonable rate should fix 
 a maximum dividend rate in the By-Laws in order that there may 
 be no incentive to increase unduly the cost of loans to borrowing 
 members. This is not so important in the State of New York 
 for the law limits the charge upon loans to 12% per annum. 
 
 What is the fiscal year? 
 
 The fiscal year is the financial year. It may be the calendar 
 year as under the New York Credit Union law, or it may be 
 from November 1st to October 31st, as is the case under the 
 Massachusetts statute. Where there is no statutory provision, 
 the fiscal year may be any 12 months, but the calendar year is 
 always to be preferred. 
 
 Where does the control of a Credit Union rest? 
 
 The absolute control of a Credit Union lies in its member- 
 ship. Though many powers are delegated to Directors, Officers 
 and Committees, the members may always reverse their decisions. 
 
 How often should members meet? 
 
 Members may meet as often as they choose but they should 
 meet at least once a year. Meetings not prescribed in the By- 
 Laws are special meetings. Those so prescribed are regular 
 meetings. 
 
 When is the Annual Meeting to be held? 
 
 The Annual Meeting should be held once a year within a 
 reasonable time after the close of each fiscal year. The date of 
 the Annual Meeting should be fixed in the By-Laws. 
 
22 
 
 What is the purpose of the Annual Meeting? 
 
 The purpose of the Annual Meeting is to receive the re- 
 ports of the Directors, Officers, and Committees for the pre- 
 ceding year ; to take action upon such reports ; to elect Directors 
 and Committees for the current year, and to transact such other 
 business as may properly come before it. 
 
 What should he a quorum at a members' meeting? 
 
 The holding of a meeting should not be made difficult by 
 requiring too large a number of members for a quorum. A 
 majority of the membership is a satisfactory number for a 
 quorum. 
 
 What should he the order of business at regular meetings? 
 The order of business should be as follows: 
 
 1. Roll Call. 
 
 2. Reading of the Minutes of the preceding meeting. 
 
 3. Report of President. 
 
 4. Report of Treasurer. 
 
 5. Report of the Credit Committee. 
 
 6. Report of the Supervisory Committee. 
 
 7. Unfinished business. 
 
 8. New business. 
 
 9. Adjournment. 
 
 What should he the method of voting at members' meetings? 
 
 Voting may be by ballot or by any other method that the 
 members may at the time determine. But each member should 
 have but one vote and no voting should be by proxy. 
 
 Is there any limit to the powers that may he exercised by 
 the members? 
 
 Within statutory provisions and in conformity with the By- 
 Laws, there is no limit to the powers that the members may 
 exercise. They may review the acts and reverse the decisions of 
 the Board of Directors, recall any Director, Officer or member 
 of any Committee, and adopt such rules and regulations for 
 the conduct of the Credit Union as they may see fit. 
 
 Where does the direct management of a Credit Union rest? 
 
 The direct management rests in the Board of Directors, 
 Officers, Credit Committee, and Supervisory Committee elected 
 at the annual meeting. 
 
23 
 
 What should be the number of Directors? 
 
 In states which have enacted Credit Union legislation the 
 minimum number of Directors is usually fixed by law. Whether 
 the number of Directors should exceed the minimum required 
 depends upon the size of the Credit Union. If the membership 
 does not exceed 50, the number of Directors need not exceed 
 five. In larger Unions the number may be increased to seven, 
 nine or even more. 
 
 What are the duties of the Board of Directors? 
 
 The Directors have the general management of the affairs 
 of the Credit Union. Unless otherwise provided in the By-Laws 
 it is their duty to act upon applications for membership and ex- 
 pulsion of members, to fix the surety bond of the Treasurer, to 
 determine the rate of interest on loans and deposits, to declare 
 dividends, to recommend amendments to By-Laws and to fill 
 vacancies in their own membership until the election and qualifica- 
 tion of successors. 
 
 What are the Officers of a Credit Union? 
 
 The Officers usually consist of a President, Vice-President, 
 Treasurer, and Secretary. These are ordinarily elected by the 
 Board of Directors out of their own number at a meeting held 
 immediately after the Annual Meeting of the members. In small 
 Credit Unions there is an advantage in permitting the offices of 
 Secretary and Treasurer to be held by one member. 
 
 What are the duties of the Credit Committee? 
 
 The Credit Committee has complete charge of the loans 
 made to members. It determines the security upon which each 
 loan shall be made and fixes the terms of its repayment. In 
 small Credit Unions, particularly in rural communities, it is 
 sometimes advantageous to allow the Board of Directors to act 
 as the Credit Committee. 
 
 What are the duties of the Supervisory Committee? 
 
 The Supervisory Committee audits the books, inspects the 
 securities, cash and accounts of the Credit Union, and supervises 
 the acts of the Board of Directors, Credit Committee and the 
 Officers. 
 
24 
 
 Should the Officers be remunerated for their services? 
 
 No Director or Officer and no member of any Committee, 
 as such, should receive remuneration for his services. If the 
 Secretary, Treasurer, or other Officer acts as Executive Clerk 
 or Business Manager of the Credit Union, he may, if the mem- 
 bers so decide, receive some compensation, but such compensa- 
 tion should be nominal. Large Credit Unions may find it nec- 
 essary to employ a paid Manager or Clerk to assist the Treasurer 
 or executive officer but the need for such an outlay will be the 
 exception rather than the rule. 
 
 Why should not Officers, Directors and Committees be 
 compensated f 
 
 Cooperation, which is the basis of credit unionism, means 
 mutual assistance. If loans are to be made at reasonable rates, 
 interest on deposits kept up to or slightly above the savings bank 
 rate, dividends paid upon shares, the credit of the Union 
 established and maintained — in short, if the Credit Union is to 
 perform the service for which it is intended, its operating ex- 
 pense must be kept at a minimum. Experience shows that mem- 
 bers who have been honored by their fellows by election to the 
 Board of Directors or to one of the Committees are willing to 
 devote a reasonable amount of time to the affairs of the Union 
 without thought of compensation. 
 
 Is special legislation necessary in the organisation of a 
 Credit Union? 
 
 Legislation is not indispensable. The Credit Unions among 
 the Jewish farmers in the United States were organized and still 
 operate as voluntary or unincorporated associations. However, 
 legislation is desirable for the sake of uniformity in organiza- 
 tion and operation and in order that Credit Unions may receive 
 adequate supervision and guidance. 
 
 Is the organization of a Credit Union difficult? 
 
 The organization of a Credit Union is extremely simple. 
 Where there is no special legislation all that is needed is to follow 
 the few fundamental principles of credit unionism, but in states 
 which have enacted Credit Union laws, the organization of a 
 Credit Union is more or less technical. Not only must the pro- 
 
25 
 
 visions of law be adhered to, but the rules and regulations laid 
 down by the Banking Department of the state, which generally 
 has charge of this matter, must also be followed. 
 
 What is the first essential in organization f 
 
 The first essential is leadership. The chances of success are 
 greatly enhanced if an energetic and upright man will undertake 
 the actual work of organization. The history of credit unionism 
 shows the importance and great value of capable, enthusiastic 
 leadership. This applies not only to organization but also to 
 operation. Unless trustworthy and efficient officers are chosen 
 the Credit Union is not likely to succeed. i /£:_ . 
 
 What is the procedure tn organisation? ' ^ — ^-'- 
 
 The organization of a Credit Union ordinarily requires the 
 holding of three meetings — the preliminary, intermediate and 
 final organization meetings, but where the law or the regulations 
 of the Banking Department do not provide to the contrary, any 
 two, or even all three of these meetings may be combined into one. 
 
 How is the preliminary organization meeting to he 
 conducted? 
 
 The following should be the order of business of the 
 preliminary organization meeting: 
 
 1. Statement of the purpose of the meeting. (See page 32 
 for form of minutes). 
 
 2. Election of temporary Chairman and Secretary. 
 
 3. General discussion. 
 
 4. Adoption of resolution to form a Credit Union. 
 
 5. Election of Committee on Organization to draft Articles 
 of Incorporation and By-Laws. 
 
 6. Setting date for the intermediate organization meeting. 
 
 What steps should he taken hy the Organization Committee 
 between the preliminary and intermediate organization meetings? 
 
 The Organization Committee should at once draft the 
 Articles of Incorporation and By-Laws. In states where Credit 
 Union legislation exists, application should be made to the Bank- 
 ing Department for blank form of Articles of Incorporation and 
 suggested form of By-Laws and the drafts when completed 
 should be submitted to the Banking Department for preliminary 
 
26 
 
 approval before the intermediate organization meeting is held. 
 (Specimen Articles of Incorporation — Organization Certificate — 
 and By-Laws will be found on pages 35 to 46). 
 
 How is the intermediate organisation meeting to be 
 conducted? 
 
 1. A temporary Chairman and Secretary should be elected. 
 (See page 33 for form of minutes). 
 
 2. Report of the Organization Committee. 
 
 3. Adoption and signing of Articles of Incorporation. 
 
 4. Adoption of By-Laws. 
 
 5. Election of Directors. 
 
 6. Election of the Credit Committee. 
 
 7. Election of the Supervisory Committee. 
 
 8. Adoption of resolution authorizing the Organization 
 Committee to take the necessary steps to obtain a charter or 
 certificate of authorization. 
 
 Where Credit Union legislation exists the beginning of 
 operations must await the granting of the charter or authoriza- 
 tion certificate. In states which have no Credit Union laws and 
 the Credit Union is formed as a voluntary association, organiza- 
 tion may be completed and operations begun at once. 
 
 How is the final organization to he conducted? 
 \. A temporary Chairman and Secretary should be elected. 
 (See page 34 for form of minutes). 
 
 2. Report of the Organization Committee. 
 
 3. Fixing of entrance fee and other fees not fixed by By- 
 Laws or left to the discretion of the Board of Directors. 
 
 4. Election of additional members. 
 
 5. Adoption of resolution authorizing the Directors, the 
 Credit Committee and the Supervisory Committee to perform all 
 acts necessary for the proper conduct of the Credit Union. 
 
 Immediately after the adjournment of the intermediate 
 organization meeting, each member of the Board of Directors 
 and each member of the Credit Committee and of the Super- 
 visory Committee should take such oath of office as is prescribed 
 by the law under which the Credit Union may be organized.* 
 
 * No form of oath is suggested as it is advisable for Credit Unions to apply to 
 the Banking Department or other supervisory state authority for authorized form. 
 
27 
 
 Such oath should be certified by an officer authorized by law to 
 administer oaths, such as a Justice of the Peace or a Notary 
 Public, and should be immediately transmitted to the Superin- 
 tendent of Banks. A similar oath should be taken immediately 
 after the adjournment of the first meeting of the Board of 
 Directors by the Officers elected at that meeting. 
 
 When is the first meeting of the Board of Directors to he 
 held? 
 
 The first meeting of the Board of Directors should be held 
 immediately after the adjournment of the final organization meet- 
 ing. It is to be conducted somewhat as follows : 
 
 1. Election of officers. (See page 47 for form of minutes). 
 
 2. Fixing the amount of the Treasurer's bond. 
 
 3. Fixing the rate of interest on loans and deposits. 
 
 4. Fixing the entrance fee and other fees not fixed in the 
 By-Laws or by the members. 
 
 5. Election of new members. 
 
 6. Adoption of books of account and forms for the con- 
 duct of the business of the Credit Union. 
 
 When is the first meeting of the Credit Committee to he 
 held? 
 
 The first meeting of the Credit Committee should be held 
 as soon after the final organization meeting as convenient. It 
 should be conducted somewhat as follows : 
 
 1. Election of a permanent Chairman who shall also act 
 as Secretary. (See page 48 for form of minutes). 
 
 2. Adoption of plans and suitable forms for the conduct 
 of the business of the Committee in accordance with the By-Laws. 
 
 3. Consideration of applications for loans. 
 
 When is the first meeting of the Supervisory Committee to 
 he held? 
 
 The first meeting of the Supervisory Committee should be 
 held as soon after the final organization meeting as convenient. 
 It should be conducted somewhat as follows : 
 
 L Election of a permanent Chairman who shall also act 
 as Secretary. (See page 49 for form of minutes). 
 
 2. Adoption of plans and suitable forms for the conduct 
 of the business of the Committee in accordance with the By-Laws. 
 
28 
 
 BOOKS AND FORMS. 
 
 The following books and forms are needed for the proper 
 conduct of a Credit Union: 
 
 1. Application for membership. 
 
 2. Subscription for shares. 
 
 3. Certificate of shares. 
 
 4. Membership book. 
 
 5. Meeting notices. 
 
 6. Minute books. 
 
 a. Members' minute book. 
 
 b. Minute book of Directors. 
 
 c. Minute book of Credit Committee. 
 
 d. Minute book of Supervisory Committee. 
 
 7. Pass book. 
 
 8. Deposit slip. 
 
 9. Check book. 
 
 10. Bank book. 
 
 11. Loan application. 
 
 12. Promissory note. 
 
 13. Tickler book. 
 
 14. Interest table. 
 
 15. Cash book. 
 
 16. Individual and general ledgers. 
 
 17. Report and financial statement. 
 
 1. APPLICATION FOR MEMBERSHIP. 
 
 This application form should be filled in by all who apply 
 for membership. It should be made out in ink and all names 
 written in full. 
 
 All applications of elected members, in their numerical 
 order, should be pasted in the membership book. 
 
 Rejected applications should not be numbered, but should 
 be filed and retained for future reference. 
 
 In the case of charter members, the blanks opposite "Pro- 
 posed by" and "Seconded by" need not be filled in. 
 
29 
 
 APPLICATION FOR MEMBERSHIP. 
 
 No...... 
 
 THE 
 
 .CREDIT UNION. 
 
 I hereby apply for membership in the- 
 
 (Date) 
 -Credit Union 
 
 and agree to subscribe for at least one share in the said Credit Union 
 at a par value of $ -and do further agree to abide by the condi- 
 tions prescribed in the By-Laws of the- Credit Union. 
 
 Name 
 
 Residence 
 
 Date of birth 
 
 Married or single ... 
 By whom employed. 
 Where employed — 
 In what capacity 
 
 How long in present position 
 
 Proposed by — 
 Seconded by — 
 Elected (date) • 
 
 (Signed) 
 
 Secretary. 
 
 2. SUBSCRIPTION FOR SHARES. 
 
 THE CREDIT UNION. 
 
 I hereby subscribe for 
 
 Credit Union of the par value of $.. 
 
 (Date) 
 
 ) shares in the- 
 — payable 
 
 share. 
 
 in.- instalments o f per 
 
 (weekly or monthly) 
 
 Member's No. 
 
 Shares previously subscribed for 
 
 Shares wholly paid for 
 
 Approved 
 Date 
 
 Treasurer. 
 
 (Signature) 
 
30 
 3. CERTIFICATE OF SHARES. 
 
 Having been elected to membership by the Board of Di- 
 rectors and having become the owner of one or more shares, 
 each member should receive a Certificate of Shares signed by 
 the President and Secretary. The certificate is to be retained 
 by the member as evidence of his membership and ownership of 
 shares and must be surrendered when he borrows from the Credit 
 Union. Whenever a member withdraws a part of his paid up 
 shares or becomes the owner of additional shares a new certifi- 
 cate should be issued to him and the old one destroyed. 
 
 Certificates should be numbered consecutively. They 
 should be printed upon small cards of good quality and 
 thickness. 
 
 CERTIFICATE OF SHARES. 
 
 Transferable only to qualified members. 
 
 No 
 
 The Credit Union. 
 
 This certifies that - is the owner 
 
 of shares, par value $- each, in The 
 
 Credit Union in the city of , state of , 
 
 and has been duly elected a member thereof. 
 191 
 
 President. Secretary. 
 
 4. MEMBERSHIP BOOK. 
 
 Any ordinary bound book containing an alphabetical in- 
 dex at the beginning, will serve as the membership book. 
 
 The full names of all members should be listed alpha- 
 betically in the index and their applications pasted in the mem- 
 bership book in numerical order. 
 
 The membership book serves as a permanent record of 
 each member, including his signature. It should be in the 
 custody of the secretary who is responsible for its safe keeping 
 and whose duty it is to keep it up-to-date. 
 
31 
 5. MEETING NOTICES. 
 
 NOTICE OF REGULAR MEETING. 
 
 The Credit Union. 
 
 The Annual Meeting of the members of the Credit 
 
 Union will be held on the of , 191, 
 
 (day) {month and year) 
 
 at M sharp at 
 
 (hour) (street and number) 
 
 You are urgently requested to be present. 
 By order of the President. 
 
 Secretary. 
 
 NOTICE OF SPECIAL MEETING. 
 
 The Credit Union. 
 
 A special meeting of the members of the Credit 
 
 Union will be held on , the of 191 , 
 
 at M, at for the purpose of 
 
 You are urgently requested to be present. 
 By order of the President. 
 
 Secretary. 
 
 6. MINUTE BOOKS. 
 
 a. Members* Minute Book. 
 
 The Members' Minute Book should be in the custody of 
 the Secretary, and should contain a permanent record of the 
 proceedings of all meetings of the members. For the purpose 
 of roll call, it should contain on the first pages a list of all the 
 members in the order in which they were admitted to mem- 
 bership. It should also contain the minutes of the organiza- 
 tion meetings, including a true copy of the Articles of In- 
 corporation and By-laws. A printed copy of the law, if any, 
 under which the Credit Union is organized should be attached 
 to the inside cover of the members' minute book for reference. 
 
32 
 FORM OF MINUTES. 
 
 Preliminary Organisation Meeting. 
 
 191. 
 
 The preliminary organization meeting of the 
 
 Credit Union was held on , 191 , at- 
 
 o'clock P. M., at the residence of at — 
 
 The following were present: 
 
 (Insert in full the names of all present) 
 
 The meeting was called to order by who outlined 
 
 the objects of the meeting and pointed out the benefits which the or- 
 ganization of a Credit Union would confer upon the (employees, members, 
 residents, etc. ) of 
 
 On motion, was duly elected Temporary 
 
 Chairman of the meeting and •- - — was duly elected 
 
 Secretary. 
 
 Following a general discussion it was voted, on motion duly made 
 and seconded, to proceed with the formation of a Credit Union. 
 
 Upon motion made and duly seconded, it was voted to proceed 
 to the election of a Committee on Organization and to authorize such 
 committee to draft Articles of Incorporation (or Organization Certifi- 
 cate)* and By-Laws and to act for the Credit Union until organization is 
 
 effected. Thereupon , —-and 
 
 were duly elected a Committee on 
 
 Organization. 
 
 It was voted to hold an intermediate organization meeting on 
 
 at o'clock P. M. at which time a report of the Organization 
 
 Committee will be submitted. 
 
 There being no further business, the meeting adjourned at 
 
 o'clock P. M. 
 
 Secretary. 
 
 •Blank form of Organization Certificate may be procured from the Banking 
 Department in states having Credit Union laws. Suggested form of Organization 
 Certificate and By-Laws which have been approved by the Banking Department of 
 New York will be found on pages 35 to 46. 
 
33 
 
 Intermediate Organization Meeting. 
 
 The intermediate organization meeting of the Credit 
 
 Union was held on - , 191 — at o'clock P. M. 
 
 at the residence of , , 
 
 The following were present: 
 
 (Insert in full the names of all present) 
 
 The meeting was called to order by , Chair- 
 man of the Organization Committee. 
 
 On motion duly made and seconded it was voted that 
 
 should serve as Chairman of the meeting, and as 
 
 Secretary. 
 
 ' The Chairman of the Organization Committee submitted a draft of 
 Articles of Incorporation (Organization Certificate) and By-Laws, which 
 he reported had been first submitted to the Banking Department and its 
 preliminary approval obtained. After discussion, upon motion duly made 
 and seconded, the Articles of Incorporation (Organization Certificate) 
 and the By-Laws, as recommended by the Organization Committee were 
 adopted and signed by all the incorporators. 
 
 On motion duly made and seconded, it was voted to proceed to the 
 
 election of five Directors as provided in the By-Laws and , 
 
 , , and 
 
 „ were thereupon elected Directors to serve 
 
 until the next annual meeting of the members, or until their successors 
 are elected and have qualified. 
 
 Upon motion duly made and seconded it was voted to proceed to 
 the election of a Credit Committee of five members and a Supervisory 
 
 Committee of three members as provided in the By-Laws. , 
 
 . . and 
 
 were regularly elected members of the Credit Com- 
 mittee and , - , and 
 
 were regularly elected members of the Supervisory Committee to serve 
 until the next annual meeting of the members, or until their successors 
 are elected and have qualified. 
 
 It was voted to authorize the Organization Committee to proceed 
 to obtain from the Banking Department a Certificate of Authorization 
 and to complete the organization of the Credit Union. 
 
 The meeting then adjourned at- o'clock P. M. 
 
 Secretary. 
 
34 
 Final Organisation Meeting. 
 
 - , , 191 
 
 The final organization meeting of the Credit 
 
 Union was held on , 191 at - - 
 
 o'clock P. M. at the residence of , - — , 
 
 The following were present: 
 
 {Insert in full the names of all present) 
 
 The meeting was called to order by , Chair- 
 man of the Organization Committee. 
 
 On motion duly made and seconded it was voted that - 
 
 should serve as Chairman of the meeting and that should 
 
 serve as Secretary. 
 
 The Chairman of the Organization Committee reported that the Bank- 
 ing Department had approved the Organization Certificate and the By- 
 laws adopted at the last meeting and had issued to the 
 
 Credit Union a Certificate of Authorization. 
 
 Upon motion duly made and seconded it was voted that the Organi- 
 zation Certificate, By-Laws and Certificate of Authorization become a 
 part of the minutes of this meeting. 
 
 Upon motion duly made and seconded it was voted that the entrance 
 fee which the By-Laws provide shall be paid by each member, shall 
 
 be for each share issued and that the transfer fee which 
 
 the By-Laws provide shall be paid upon the transfer of shares from one 
 member to another, shall be — -- 
 
 The meeting then proceeded to elect the following additional 
 
 members. 
 
 Proposed by Seconded by 
 
 On motion duly made and seconded, it was voted that the Board 
 of Directors, Credit Committee and the Supervisory Committee be 
 authorized to do and perform all acts in conformity with the law and 
 
 the By-Laws necessary for the proper conduct of the 
 
 — - — Credit Union. 
 
 There being no further business the meeting adjourned at 
 o'clock P. M. 
 
 Secretary. 
 
35 
 
 ORGANIZATION CERTIFICATE OF CREDIT UNION.* 
 
 •Blanks for organization certificate of Credit Unions in New York State should 
 be procured from the State Banking Department at Albany. 
 
 We, the undersigned, all being of full age and employed or residing 
 
 in the State of New York, and •-- - of us being 
 
 citizens of the United States, for the purpose of becoming incorporated 
 as a Credit Union, pursuant to the provisions of Article XI of the Bank- 
 ing Law, Chapter 2 of the Consolidated Laws, do hereby certify : 
 
 1. That the name of the proposed corporation is ~ — 
 
 - — Credit Union. 
 
 2. That the place where its business is to be transacted is 
 
 3. That the par value of its shares is dollars 
 
 4. That the full name, residence and post-office address of each of 
 the incorporators and the number of shares subscribed for by each, are 
 as follows : 
 
 Post-Office No. of 
 
 Name Residence address shares subscribed 
 
 5. That the term of its existence shall be 
 
 6. That the number of its directors is — and the names and 
 
 addresses of the incorporators who shall be its directors until the first 
 annual meeting of its shareholders are as follows : 
 
 Names Addresses 
 
 IN WITNESS WHEREOF, we have made, signed and acknowledged 
 this certificate in duplicate, this day of 191 
 
36 
 
 STATE OF NEW YORK ) 
 COUNTY OF Us. 
 
 CITY OF J 
 
 On this day of- 
 
 before me ~ 
 
 191 — , personally appeared 
 
 to me known to be the persons described in and who executed the fore- 
 going certificate and severally acknowledged that they executed the same. 
 
 *The signature of the Notarjr Public or Commissioner of Deeds who takes the 
 acknowledgments must be authenticated by a County Clerk's certificate. 
 
37 
 
 BY-LAWS. 
 
 ARTICLE I 
 
 Name. 
 
 The name of this corporation shall be the Credit 
 
 Union of — - - 
 
 ARTICLE II 
 
 Purposes. 
 
 The purposes of this Credit Union shall be to promote thrift aimong 
 its members and to make loans to its members at reasonable rates, with 
 or without security. 
 
 ARTICLE III 
 
 Membership. 
 
 Any of upon 
 
 his election to membership and upon subscribing for one or more shares 
 and paying for the same in whole or in part, together with the entrance 
 fee as provided in Article X of these By-Laws shall become a member 
 of this Credit Union. 
 
 ARTICLE IV 
 
 Meetings of Members. 
 
 Section 1. The annual meeting of the members shall be held on 
 the third Tuesday of January of each year. General meetings of mem- 
 bers shall also be held quarterly on the third Tuesdays of April, July 
 and October of each year. A notice of all meetings of the members 
 shall be mailed by the Secretary to each member not less than five nor 
 more than 10 days prior to such meetings. 
 
 Section 2. One-half of the members shall constitute a quorum. If 
 a quorum is not present on the date first appointed, the meeting shall 
 be adjourned for 10 days and a second notice shall be sent to all mem- 
 bers, at which time those members present shall constitute a quorum 
 for the transaction of all business. 
 
 Section 3. Each member shall have but one vote. No vote shall 
 be cast by a proxy. When not otherwise provided in these By-Laws the 
 vote of the majority of the members present at a meeting shall be the 
 act of the corporation. 
 
 Section 4. The order of business of the meetings of the members 
 shall be as follows : 
 
 a. Roll Call. 
 
 b. Reading of the Minutes of the Last Meeting. 
 
 c. Report of the Directors. 
 
38 
 
 d. Report of the Treasurer. 
 
 e. Report of the Credit Committee. 
 
 f. Report of the Supervisory Committee. 
 
 g. Unfinished business, 
 h. New business. 
 
 i. Adjournment. 
 
 Section 5. The members by a majority vote of all the shareholders 
 shall have the power to review the acts and reverse the decisions of 
 the Board of Directors of this Credit Union. 
 
 Section 6. The Board of Directors may at its discretion call special 
 meetings of the members and shall do so upon the order of the Super- 
 visory Committee or upon the request of any 10 members of the 
 Credit Union in writing. Notice of such special meetings, wherein the 
 purpose of the meetings shall be clearly stated, shall be sent by the 
 Secretary to each member as provided in Section 1 of this Article. No 
 other business than that specified in the written notice shall be trans- 
 acted at such meetings. 
 
 Section 7. The fiscal year of this Credit Union shall end on the 
 thirty-first day of December. 
 
 ARTICLE V. 
 Directors. 
 
 Section 1. At the annual meeting the members of this Credit Union 
 shall elect a Board of Directors of five members, a Credit Committee 
 of five members, and a Supervisory Committee of three members to 
 serve until the next annual meeting of the shareholders and until their 
 successors are elected and have qualified. No member of the Board 
 of Directors shall serve on the Supervisory Committee nor shall any 
 member of the Supervisory Committee serve on the Board of Directors. 
 
 Section 2. A meeting of the newly elected Board of Directors shall 
 be held within 10 days after the annual meeting of shareholders, and 
 the Board of Directors shall elect from their number a President, a 
 Vice-President, a Secretary and a Treasurer who shall be the executive 
 officers of this Credit Union. Thereafter the Board of Directors shall 
 meet at least once in each month. At all meetings three members shall 
 constitute a quorum. 
 
 Section 3. The Board of Directors shall have the general manage- 
 ment of the affairs, funds and records of this Credit Union. It shall 
 be their special duty to act upon all applications for membership and 
 the expulsion of members; to fix the amount of the surety bond of 
 the Treasurer; to determine the rate of interest on loans and deposits; 
 to declare dividends; to fix the maximum number of shares which may 
 be held by any one member; to recommend amendments to these By- 
 Laws; to fill vacancies in the Board until the election and qualification 
 of successors, and to perform such other duties as the members may 
 from time to time authorize. 
 
39 
 
 Section 4. No officer or other member of the Board of Directors 
 shall receive compensation for his services with the exception of the 
 Treasurer, (or Secretary) whose remuneration, if any, shall be fixed by 
 the members. 
 
 Section 5. The members may, at a special meeting called for that 
 purpose, declare by a two-thirds vote of all the members the office of 
 any member of the Board of Directors vacant, provided said meeting 
 was called in accordance with the provisions of Article IV, Sections 1 and 
 6 of these By-Laws. 
 
 ARTICLE VI 
 Officers and Their Duties. 
 
 Section 1. The officers of this Credit Union shall consist of a Presi- 
 dent, Vice-President, Treasurer and Secretary. 
 
 Section 2. The duties of the President shall be to preside at meetings 
 of the members or of the Board of Directors; to countersign such 
 checks, drafts and notes drawn by the Credit Union as may require his 
 signature, and to perform the other usual duties connected with the 
 office. 
 
 Section 3. The Vice-President shall, in the event of the disability 
 of the President, perform the duties of the President and such other 
 duties as the Board of Directors may from time to time prescribe. 
 
 Section 4. The Treasurer shall be the custodian of the funds, se- 
 curities, books of account and all other valuable papers of the Credit 
 Union. He shall keep a separate set of books of entry, containing in 
 detail the financial transactions of the Credit Union. He shall sign all 
 checks, drafts and notes drawn by the Credit Union. The Treasurer 
 shall furnish a bond for the faithful performance of his duties in such 
 amount as the Board of Directors shall prescribe. 
 
 Section 5. The Secretary shall keep correct records of all meetings 
 of the members and of the Board of Directors. He shall give notice 
 of all meetings of the members in the manner prescribed by the By-Laws 
 and shall perform all other duties incident to his office. In the event 
 of the disability of the Treasurer his duties shall be performed by the 
 Secretary. 
 
 ARTICLE VII 
 Credit Committee. 
 
 Section 1. The Credit Committee shall consist of five members. 
 
 Section 2. The Credit Committee shall approve every loan made 
 by this Credit Union to its members. Every application for a loan shall 
 be made in writing and shall state the purpose for which the loan is 
 desired and the nature of the security offered. No loan shall be made 
 unless it has received the unanimous approval of those members of said 
 committee who were present when it was considered, who must be at 
 least a majority of said committee, nor if any member of said committee 
 shall disapprove thereof. 
 
40 
 
 Section 3. The Credit Committee may meet at any time and shall 
 meet as often as necessary. The Chairman of the Credit Com- 
 mittee shall notify each member in advance of every meeting of the 
 Committee. The Credit Committee shall keep a record of its proceedings 
 in a special book provided for that purpose. 
 
 ARTICLE VIII 
 
 Supervisory Committee. 
 
 Section 1. The Supervisory Committee shall consist of three mem- 
 bers who shall be elected annually. The Supervisory Committee shall 
 meet at least once every three months to audit the books of this Credit 
 Union and make reports of the same to the members. 
 
 Section 2. The Supervisory Committee shall inspect the securities, 
 cash and accounts of this Credit Union and supervise the acts of its 
 Board of Directors, Credit Committee and officers. 
 
 Section 3. At any time the Supervisory Committee, by a unanimous 
 vote at a meeting called for that purpose, may suspend any member 
 of the Credit Committee or of the Board of Directors or any officer, 
 and by a majority vote may call a meeting of the shareholders to con- 
 sider any violation of Article XI of the Banking Law or of these By- 
 Laws, or any practice of this Credit Union which, in the opinion of such 
 Committee, is unsafe and unauthorized. 
 
 Section 4. Within seven days after the suspension of any member 
 of the Board of Directors or Credit Committee or of any officer, the 
 Supervisory Committee shall call a special meeting of the members to 
 take such action relative to such suspension as may seem necessary. 
 A notice of such meeting shall be mailed to each member of this Credit 
 Union not less than five days prior to the date of such meeting. The 
 Supervisory Committee shall fill vacancies that may occur in its own 
 membership until the next annual meeting. 
 
 Section 5. At the close of each fiscal year the Supervisory Com- 
 mittee shall make an audit of the books and records and an examination 
 of the business and affairs of the Credit Union for the year and shall 
 make a full report of its assets and liabilities, receipts and disburse- 
 ments to the Board of Directors, and shall cause such report to be read 
 at the annual meeting of shareholders and filed with the records of 
 the Credit Union. 
 
 Section 6. The Supervisory Committee shall keep a complete record 
 of all its proceedings. All reports of this Committee shall be filed and 
 preserved with the records of this Credit Union. 
 
 ARTICLE IX 
 
 Capital. 
 
 The capital of this Credit Union shall consist of the payments made 
 upon shares by its members, and unpaid dividends credited thereon. 
 
41 
 
 ARTICLE X 
 Shares. 
 
 Section 1. The number of shares which may be issued by this 
 Credit Union shall be unlimited. 
 
 Section 2. The par value of each share shall be $5. 
 
 Section 3. Shares may be paid for in full at the time of subscrip- 
 tion or may be paid in regular weekly or monthly instalments. 
 
 Section 4. Whenever payments made by a member upon instal- 
 ment shares shall equal the par value of a share such payments shall 
 be transferred and he shall become the owner of a full paid share and 
 shall receive a Certificate of Shares signed by the President and Secretary. 
 
 Section 5. An entrance fee to be fixed by the members shall be 
 charged for each share subscribed for. 
 
 Section 6. Fully paid shares may be transferred to any person eligi- 
 ble for membership, subject to the approval of the Board of Directors 
 and the provisions of Section 9 of this article and upon the payment 
 of a transfer fee not exceeding $0.25 per share. No transfer shall 
 be permitted if the transferrer is indebted to this Credit Union. 
 
 Section 7. The money credited on one or more shares may be with- 
 drawn on any day when payments for shares may be received, provided 
 the withdrawing member has filed a written notice of such intention; 
 but the Board of Directors may require a member at any time to give 
 30 days' notice in writing of his intention to withdraw the whole 
 or any part of the amount paid in by him on account of shares. Such 
 withdrawing member shall receive the amount paid by him on account 
 of shares, together with such dividends as have been credited thereto, 
 less any lawful fines or other obligations to this Credit Union. With- 
 drawals shall be paid in the order of their filing and as funds therefor 
 become available. After the filing of notice of withdrawal provided 
 herein, the shares shall continue to participate in the dividends until 
 they are redeemed. No member who has filed a notice of intention to 
 withdraw shall exercise any of the privileges of membership. 
 
 Section 8. The Board of Directors may expel any member who 
 has not carried out his obligations to the Credit Union, or who has 
 been convicted of a criminal offense, or who neglects or refuses to 
 comply with the provisions of the Statute under which this Credit 
 Union is organized, or of the By-Laws, or who habitually neglects to pay 
 his debts, or who becomes insolvent or bankrupt. The members at 
 any regularly called meeting may expel any member whose private life 
 is a source of scandal. But no member shall be expelled until he has 
 been informed in writing of the charges against him and shall have 
 had reasonable opportunity to be heard. 
 
 In the event of the expulsion of a member for any cause, such 
 expelled member shall be deemed a withdrawing member as regards the 
 conditions hereinabove provided for redemption of shares. Any mem- 
 ber who withdraws or is expelled shall not be relieved of any liability 
 to the corporation. 
 
42 
 
 Section 9. No officer, director, attorney, committee member, clerk 
 or agent of this Credit Union shall as an individual, discount, or di- 
 rectly or indirectly purchase from another member a share in this Credit 
 Union, whether filed for withdrawal or not. 
 
 ARTICLE XI 
 Fines. 
 
 A member failing to make a payment upon shares when due shall 
 pay a fine at the rate of two per centum per month or fraction thereof 
 on amounts in default, provided however, that such fine shall in no 
 case be less than $.05. If the fine remains unpaid for three months, 
 such member shall be suspended from membership and may at the dis- 
 cretion of the Board of Directors, be expelled from this Credit Union, 
 and any balance remaining to his credit, after deducting all sums due 
 this Credit Union shall be paid to him by the Treasurer. 
 
 ARTICLE XII 
 
 Deposits. 
 
 Section 1. The Credit Union may receive on deposit the savings 
 of members in such amounts as the Board of Directors may determine. 
 
 Section 2. Deposits shall draw interest beginning the first day of 
 the month following the day of the making of the deposit. 
 
 Section 3. The rate of interest on deposits shall be determined by the 
 Board of Directors, quarterly, in advance, and payable within 30 
 days after the first day of January, April, July and October, and shall 
 be credited to the account of the depositor or withdrawn by him at 
 his option. 
 
 Section 4. Any depositor may withdraw all or part of his deposit 
 at any time that the office of this Credit Union is open for business. 
 The Board of Directors may, however, require 30 days' notice in 
 writing of the depositor's intention to make the withdrawal. Such with- 
 drawals shall be honored in the order in which the notice therefor 
 is filed, in the same manner as in the case of withdrawals of shares as 
 provided in Section 7 of Article X of these By-Laws, provided, however, 
 that in the matter of withdrawals, deposits shall be preferred over 
 shares. 
 
 ARTICLE XIII 
 Power to Borrow. 
 
 This Credit Union may borrow money to an amount not exceed- 
 ing 40% of its capital except when its capital is $5,000 or less, in which 
 event it may borrow any amount up to $2,000, provided, however, that 
 the amount to be borrowed, the terms upon which the loan is to be 
 obtained and the name of the prospective lender are in each instance first 
 submitted to a meeting of the members and the loan duly authorized 
 by them. 
 
^ Article XIV. Sec. r 
 
 Section 1. The capital, deposits, ^ua^^..._, 
 and all other moneys of this Credit Union may be invested in one oi 
 more of the following ways and in such ways only: 
 
 a. They may be lent to members for such purposes and upon such 
 security and terms as provided in Article XV of these By-Laws. 
 
 b. They may be deposited to the credit of this Credit Union in 
 savings banks, state banks or trust companies incorporated under the 
 laws of the State of New York, or in national banks located therein. 
 
 ARTICLE XV 
 Loans. 
 
 Section 1. Loans may be made to any member of this Credit Union 
 in good standing. 
 
 Section 2. No officer or member of the Board of Directors or of 
 the Credit Committee or of the Supervisory Committee shall either 
 borrow directly or indirectly or become surety for any loan from this 
 Credit Union, unless such loan shall have been approved at a regularly 
 called meeting of the members by a two-thirds vote of those present, and 
 the notice of such meeting shall have stated that the question of loans to 
 directors, officers, or members of Committees would be considered at 
 such meeting. 
 
 Section 3. No loan in excess of $50 shall be made by this Credit 
 Union unless security therefor is taken. The term "security" shall in- 
 clude an endorsed note. 
 
 Section 4. From each borrowing member the Credit Union shall 
 require a surrender and pledge of the Certificate of Shares* issued by 
 it to the member to whom such loan is made. 
 
 Section 5. Loans shall be granted only for productive purposes 
 or urgent needs. 
 
 Section 6. The amount of the loan, the time for which it is granted, 
 the terms of its repayment and the form and value of the security shall 
 be fixed by the Credit Committee. 
 
 Section 7. The rate of interest charged upon loans shall be fixed 
 by the Board of Directors. In no event shall the interest rate exceed 
 one per centum per month. 
 
 Section 8. All loans shall be secured by the promissory note of 
 the borrower endorsed by one or more responsible endorsers. The Credit 
 Committee may demand such additional security as it deems proper. 
 
 *As has been stated above these By-Laws are so drawn as to conform to the 
 New York Credit Union Law. The issuance of a Certificate of Shares and 
 its surrender by a borrowing member appears to be an unnecessary requirement 
 and persons organizing Credit Unions in other states are advised not to include 
 this provision in the By-Laws. 
 
44 
 
 Section 9. Applications for loans shall state specifically the purpose 
 for which the money is borrowed, and that no consideration has passed 
 or will pass from the borrower to the endorser for their endorsement. 
 In case the facts as stated in the apphcation are not found to be as 
 represented, or the money borrowed has been used for purposes other 
 than those for which it was granted, or if the borrower*- 
 
 the loan shall immediately become due and payable. In the event that 
 the Board of Directors shall deem any loan not safe for any reason what- 
 soever, additional security or immediate repayment of the loan may be 
 demanded. 
 
 Section 10. No loan shall be granted except with the unanimous 
 approval of the members of the Credit Committee present when the 
 same is considered, who shall constitute at least a majority of said Com- 
 mittee, nor if any member of said Committee shall disapprove thereof. 
 
 Section 11. Appeals from the decisions of the Credit Committee 
 may be taken to the Board of Directors, who may lay the matter before 
 the shareholders. 
 
 ARTICLE XVI 
 
 Pass Book. 
 
 Section 1. Each member shall receive a pass book in which shall 
 be entered all moneys paid by him to the Credit Union on account of 
 shares, deposits and loans, all moneys withdrawn by him and other debits 
 and credits in connection with his account with the Credit Union. 
 Each entry in such pass book shall be initialed by the Treasurer or 
 other person receiving or paying out the money represented thereby. If 
 a pass book is lost or stolen, the owner shall notify the Treasurer at 
 once and may obtain a duplicate pass book upon establishing his owner- 
 ship and paying a fee of $0.25. In all cases a payment by the Treasurer 
 upon presentation of the pass book and the member's Certificate of 
 Shares shall be a discharge to the Credit Union for the amount so paid. 
 
 ARTICLE XVII 
 
 Guaranty Fund. 
 
 Section 1. After the payment of organization expenses, all entrance 
 fees, fines and transfer fees shall be known as reserve income and 
 shall be added at once to the guaranty fund of this Credit Union. 
 
 Section 2. At the close of each fiscal year there shall be set apart 
 as a guaranty fund 25% of the net earnings which have accumulated 
 
 *In the case of an urban Credit Union, these blanks should be filled out to 
 provide for the contingency of the borrower's severing his connection with the 
 employment, the fraternal, labor or religious organization or whatever the basic 
 unit of the Credit Union may be, and in the case of a rural Credit Union, to provide 
 for the contingency of the borrower's disposing of his personal property or his farm 
 or ceasing to reside thereon. 
 
45 
 
 during the fiscal year. Upon recommendation of the Board of Directors, 
 the members at an annual meeting may increase, and whenever such 
 guaranty fund equals the amount of capital, may decrease, the proportion 
 of net earnings which is to be set apart as a guaranty fund. The 
 guaranty fund shall not, however, exceed the capital plus 50% of the 
 other liabilities of this Credit Union. 
 
 Section 3. Losses incurred by this Credit Union shall be charged 
 to the guaranty fund. Any sums recovered on items previously charged 
 to it shall be credited to such fund. 
 
 Section 4. The guaranty fund shall be the property of this Credit 
 Union and shall be held to meet contingent losses and no share therein 
 may be claimed by any member except upon dissolution in the manner 
 provided by statute and Article XXI of these By-laws. 
 
 ARTICLE XVIII 
 
 Dividends. 
 
 Section 1. Dividends may be declared by the Board of Directors 
 at their annual meeting immediately following the annual meeting of 
 members, out of the undivided profits of this Credit Union. Undivided 
 profits are to be arrived at by crediting to the profit and loss account, 
 earnings from all sources, and charging against such account all expenses 
 paid or incurred, interest paid or accrued and unpaid on debts owing 
 by the Credit Union, and all losses sustained by it in excess of its 
 guaranty fund. The credit balance of the profit and loss account as 
 thus determined shall constitute the undivided profits at the close of 
 such period and shall be applicable to the payment of dividends. But 
 no dividends shall be declared or paid by this Credit Union until it 
 shall have made good any existing impairment of its capital and carried 
 to its guaranty fund such part of its net earnings as is required by 
 Article XVII, Section 2 of these By-Laws. 
 
 Section 2. Dividends shall be paid only on fully paid shares. Shares 
 which become fully paid during the year shall be entitled to a pro- 
 portionate part of said dividend calculated from the first day of the 
 iponth following such payment in full. Dividends may be credited or 
 paid in cash at the option of the shareholder within 30 days after 
 declaration or as soon thereafter as funds therefor shall become available. 
 
 ARTICLE XIX 
 
 Liability. 
 
 Members shall be equally and ratably liable for the payment of the 
 debts of this Credit Union but no member shall be Hable for an amount 
 in excess of the par value of the shares which he owns or for which 
 he has subscribed. 
 
46 
 
 ARTICLE XX. 
 
 Amendments to By-Laws. 
 
 These By-Laws may be amended by a three-fourths vote of the mem- 
 bers present at any meeting; provided the proposed amendment shall have 
 first had the approval of the Superintendent of Banks and that notice 
 of such meeting containing a true copy of the proposed amendment shall 
 have been given to each member as prescribed in Section 1 of Article IV 
 of these By-Laws. 
 
 ARTICLE XXI. 
 
 Dissolution. 
 
 Section 1. At any meeting specially called to consider the subject, 
 four-fifths of the members of the Credit Union, upon the unanimous 
 recommendation of the Board of Directors, may in person consent that 
 the Credit Union shall be dissolved and shall signify such consent in 
 writing. The Credit Union shall then be dissolved in accordance with 
 the statute under which it was organized. 
 
 Section 2. In the event of liquidation, distribution of the assets 
 of the Credit Union shall be made in the following order: 
 
 a. Repayment of money borrowed, including accrued interest. 
 
 b. Payment of other legal obligations to non-members. 
 
 c. Payment of deposits including accrued interest. 
 
 d. Pro rata apportionment of the balance among the shareholders. 
 
47 
 
 b. Directors' Minute Book. 
 
 The Directors' minute book should be in the custody of 
 the Secretary and should contain a permanent record of the 
 proceedings of all meetings of the Directors. 
 
 FORM OF MINUTES OF 
 MEETING OF DIRECTORS. 
 
 , 191-... 
 
 The meeting of the Board of Directors of the 
 
 Credit Union was held on , 191 — at 
 
 o'clock P. M., at -..-, - 
 
 The following were present: 
 
 (Insert in full the names of all present) 
 The meeting was called to order by 
 
 It was voted that should serve as Chairman 
 
 of the meeting and that should serve as Secretary. 
 
 Thereupon, the following officers were regularly elected to serve 
 until the next annual meeting of directors. 
 
 President. 
 
 Vice-President. 
 
 -•• Secretary. 
 
 Treasurer. 
 
 It was voted that the surety bond of the Treasurer should be fixed 
 
 at $2,000. 
 
 It was voted that each member who is delinquent in the payment 
 
 of instalments upon his shares shall pay a fine of ^ per 
 
 share for each week during which such delinquency continues. 
 
 On motion it was voted to elect the following persons to member- 
 ship in the Credit Union, each having been regularly proposed and 
 seconded, and each having subscribed for at least one share. 
 
 Name Proposed by Seconded by 
 
 On motion duly made and seconded it was voted that the Credit 
 
 Union shall pay interest at the rate of - - ~ per annum 
 
 upon all savings deposits made by its members. It was voted that the 
 rate of interest upon loans made to members shall be 
 
 Secretary. 
 
48 
 
 c. Minute Book of the Credit Committee. 
 
 The minute book of the Credit Committee should be kept 
 in the custody of the Chairman of the Committee who also 
 acts as Secretary, and should contain a permanent record of 
 the proceedings of all meetings of the Committee. 
 
 FORM OF MINUTES 
 OF MEETING OF CREDIT COMMITTEE. 
 
 , 191. 
 
 A meeting of the Credit Committee of the 
 
 Credit Union was held on , 191 — at 
 
 o'clock P. M. at , 
 
 The following were present: 
 
 was elected permanent 
 
 Qiairman of the Committee. 
 
 The Committee then proceeded to consider applications for loans. 
 The following applications were granted, having received the unanimous 
 vote of all the members present. 
 
 , $50.00, secured by his note, endorsed by 
 
 ~ — — , payable 
 
 with interest at %. 
 
 $150.00, secured by his note, endorsed by 
 , payable 
 
 with interest at- 
 
 The application of for a loan of 
 
 $200.00 was deferred until applicant furnishes endorsers satisfactory to 
 the Committee. The application of -•■ was re- 
 jected on the ground of 
 
 On motion, the Committee adjourned to meet again in one week. 
 
 Chairman. 
 
49 
 
 d. Minute Book of the Supervisory Committee. 
 
 The minute book of the Supervisory Committee should 
 be in the custody of the Chairman of that Committee who also 
 acts as Secretary. It should serve as a permanent record 
 of all the proceedings of the Committee. 
 
 FORM OF MINUTES OF MEETING 
 OF THE SUPERVISORY COMMITTEE. 
 
 . 191. 
 
 A meeting of the Supervisory Committee of the 
 
 Credit Union was held on , 191 — at 
 
 o'clock P. M.. at the residence of ~ 
 
 The following were present: 
 
 was elected permanent Chairman of the 
 
 Committee. 
 
 It was voted that a meeting of the Supervisory Committee should be 
 
 held during the - week of 191 — for the purpose 
 
 of auditing the books of the Credit Union. 
 
 On motion, the Committee adjourned. 
 
 Chairman. 
 
 DETAILS OF OPERATION. 
 
 A Credit Union receives cash and pays out cash. The 
 Receipts consist of proceeds from shares, deposits, interest 
 and payments on loans, fees, money borrowed, etc. The Dis- 
 bursements consist of shares redeemed, dividends paid, de- 
 posits withdrawn, loans made, interest paid on deposits and upon 
 borrowed money, borrowed money repaid, and expenses. 
 
 7. THE PASS BOOK. 
 
 The Pass Book is intended to provide each member with 
 an individual record of his transactions with the Credit Union. 
 In it should be entered all moneys received from or paid to 
 the member. It should be of convenient size for mailing" and 
 pocket use and should contain about 20 pages printed som-ewhat 
 like the pages of the individual ledger. The By-Laws should be 
 printed at the end of the Pass Book for ready reference. 
 
50 
 
 Pass Books should be retained by members and be 
 presented whenever money is paid in or withdrawn accom- 
 panied by the Certificate of Shares* 
 
 As a safeguard against loss and to insure its possession 
 when a borrower desires to make a withdrawal of funds from 
 the Credit Union, the Certificate of Shares should always 
 be kept in a pocket provided on the inside of the back cover 
 of the Pass Book. 
 
 On the outside cover of the Pass Book should be printed the 
 following : 
 
 - ~ - — - Credit Union 
 
 PASS BOOK 
 
 of 
 
 (Owner's name) 
 
 Transferable only to qualified members. 
 
 Upon the inside of the front cover of the Pass Book, the 
 following directions should be printed: 
 
 This Pass Book shows the condition of your account with the Credit 
 Union. Take good care of it. 
 
 Bring the Pass Book with you whenever you desire to pay in or with- 
 draw money, and always keep your Certificate of Shares in the pocket of 
 the Pass Book. 
 
 When you pay in money make out a Deposit Slip. See to it that 
 the entries in your Pass Book correspond with those on the Deposit Slip. 
 
 The Pass Book is to be presented to the Treasurer at least once 
 every three months for balancing. It should be presented for inspection 
 when called for. 
 
 Upon discontinuance of your membership and settlement of your 
 account, the Pass Book should be surrendered to the Treasurer. 
 
 'Ordinarily the Pass Book should be the badge of membership and payments 
 should be made by the Treasurer upon its presentation. The New York Law 
 however, requires borrowing members to "surrender and pledge" to the Credit 
 Union "evidences of membership" issued by it. For this reason we have suggested 
 above a Certificate of Shares which, instead of the Pass Book, may be 
 surrendered by borrowing members, and retained by the Treasurer until the loans 
 have been repaid. A borrowing member who is not the owner of a fully-paid share 
 must surrender his Pass Book until the loan has been repaid or until such time 
 as he becomes the owner of a share and receives a Certificate of Shares. 
 
Sea 
 
 
 si 
 
 •Ss 
 
 ^ 
 
 51 
 
52 
 
 8. DEPOSIT SLIP. 
 
 When money is paid in by a member on loans, shares, 
 deposits or otherwise, the Pass Book should be accompanied 
 by a Deposit Slip properly itemized, which should be retained 
 by the Treasurer as a part of his permanent records. 
 
 FORM OF DEPOSIT SLIP. 
 
 Deposited 
 
 in 
 TREniT TTNTON 
 
 BY 
 
 
 191 
 
 
 Omit all dollar marks 
 
 Dollars 
 
 Cents 
 
 Shares 
 
 
 
 
 Deposits 
 
 
 
 
 Loans ~- - 
 
 Int. on loans- — 
 
 
 
 
 
 
 
 Fees and fines 
 
 
 
 
 
 
 
 
 
 
 
 
 Total 
 
 
 
 
 9. CHECK BOOK. 
 
 Money disbursed by a Credit Union should be by check 
 drawn upon the bank selected as depository. The purposes 
 for which the check is drawn should be itemized in the follow- 
 ing manner on the stub from which the check is detached: 
 
53 
 
 Deposits withdrawn 
 
 Interest No. 
 
 Shares withdrawn 
 
 Dividend No. 
 
 Loan No — 
 
 The use of a rubber stamp as above is of assistance in 
 itemizing the check on the accompanying stub. 
 
 The Treasurer should draw no checks without authoriza- 
 tion. Each check should be signed and countersigned as pro- 
 vided in the By-Laws. 
 
 FORM OF CHECK. 
 
 .2 53 
 
 U 
 
 No New York 191 
 
 Bank of — 
 
 Pay to ~ or order 
 
 _ — . _ Dollars 
 
 Credit Union 
 
 $ — Treasurer. 
 
 10. BANK BOOK. 
 
 Immediately after the final organization meeting the 
 Credit Union should select a bank as depository for its funds. 
 Where the law gives preference in state institutions to Credit 
 Union deposits, a state bank or trust company should be 
 selected in preference to a national bank. All moneys re- 
 ceived by the Treasurer should be deposited as soon as possi- 
 ble in the bank selected. 
 
 On the last day of each month the Treasurer should de- 
 posit all money on hand and leave the bank book to be 
 balanced. 
 
 11. LOAN APPLICATION. 
 
 The upper part of the application for a loan should be 
 filled out by or for the applicant and signed by him. The 
 lower part should be filled out and signed by the Credit 
 Committee. 
 
54 
 
 The Credit Committee should record in its minute book 
 every appHcation approved or rejected. 
 
 Every granted application should be given a number. The 
 same number should also be given to the loan to identify it 
 through all its stages. 
 
 The Credit Committee's approval of an application is the 
 sole authority for the Treasurer's drawing a check for a loan. 
 The application should be kept by the Treasurer among his 
 permanent records. 
 
 FORM OF APPLICATION FOR LOAN. 
 
 Loan No. 
 
 THE -.- CREDIT UNION. 
 
 Date 
 
 I hereby make application for a loan of 
 ($ ) for the purpose of 
 
 to be repaid as follows 
 
 to be secured by my promissory note endorsed by: 
 
 Name Address 
 
 Name Address 
 
 I hereby certify that all the statements made by me in connection 
 with this application are true. 
 
 Signature 
 
 Address- 
 
 er© be filled out by credit committee upon the granting of loan) 
 
 Amount Granted $ 
 
 Purpose — 
 
 Security - 
 
 Endorsers - -- 
 
 Terms - 
 Remarks 
 
 The treasurer is hereby authorized to draw a check for the amount 
 of this loan to the order of the above named member upon his presenta- 
 tion of the required security and the surrender of his Certificate of Shares. 
 
 Credit Committee - 
 
55 
 12. PROMISSORY NOTE. 
 
 The note should be signed in full by the maker and the 
 endorsers in the presence of the Treasurer. It should be 
 given a number corresponding to the number of the loan. 
 
 FORM OF NOTE. 
 
 Loan No -.. -- — 191 
 
 (Place and Date) 
 
 For Value Received, we, • 
 
 as principal, and and 
 
 - -as sureties, promise to pay to the order of 
 
 THE CREDIT UNION at 
 
 the sum of — payable as follows : 
 
 with interest at the rate of ~% per month on monthly balances 
 
 payable 
 
 It is understood and agreed that, in default of pa3rment of any in- 
 stalment on this note or in the event that the money borrowed on this 
 note is not used for the purposes set forth in the application, or in case 
 the Credit Union shall deem the security thereof unsafe for any reason 
 whatsoever, then this note or so much thereof as may remain unpaid 
 shall immediately become due and payable. 
 
 It is further understood and agreed that in default of payment of any 
 instalment on this note, the Credit Union may apply to its payment such 
 amounts as have been paid by the principal upon shares as represented 
 by the Certificate of Shares surrendered and pledged as collateral se- 
 curity hereon. 
 
56 
 13. TICKLER. 
 
 The Tickler is a book in which due and maturity dates of 
 notes and dates of instalment payments upon shares are 
 entered. It enables the Treasurer to keep in intimate touch 
 with the condition of each member's account. An ordinary 
 commercial diary will answer the purpose. 
 
 14. INTEREST TABLE. 
 
 The interest table given below is constructed on the basis 
 of one per cent, per annum. 
 
 To compute the interest on a given sum for a given time, 
 find the amount in the first left-hand column of the table, then 
 proceed to the right, until the column headed by the number 
 of months desired is reached. The figures in that square give 
 the amount of interest at the rate of one per cent, per annum. 
 By multiplying that amount by the rate of interest to be 
 charged or paid the correct amount is obtained. 
 
 It will be observed that the amounts run in multiples of 
 $5. If the amount upon which interest is to be computed is 
 not a multiple of five, $32. for example, it is necessary first 
 to compute the interest on $30., then the interest on $2., and 
 multiply the sum by the rate of interest to be paid or charged. 
 
 In computing interest on loans repaid in monthly instal- 
 ments, interest for a full month should be charged for any 
 portion of a month and interest on a dollar should be charged 
 on any fraction of a dollar. 
 
 When loans are repaid in weekly or semi-monthly instal- 
 ments, interest should be computed and paid at the end of 
 each calendar month upon the balance due at the beginning 
 of that month. 
 
 In computing interest on deposits, interest should be 
 allowed only for full calendar months and no interest should 
 be allowed for a fraction of a calendar month, nor for a frac- 
 tion of a dollar. 
 
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58 
 15. CASH BOOK. 
 
 The cash book is the principal book of account of a Credit 
 Union. It is divided into two main divisions — Cash Received 
 and Cash Disbursed. Receipts are entered upon the left- 
 hand or even numbered pages, and Disbursements are entered 
 upon the right-hand or odd numbered pages. Each page is 
 divided into columns headed by the items for which money was 
 received or paid out. 
 
 To make a receipt entry in the Cash Book, there should 
 first be put down, on the left hand page, the date and the name 
 of the person from whom the money was received and the 
 total amount entered in the column 'Total Receipts." Then 
 the items of the total amount as they appear on the accom- 
 panying Deposit Slip should be entered in their proper columns. 
 
 To make a disbursement entry in the Cash Book, there 
 should first be put down, on the right-hand page, the date and 
 the name of the person to whom the money was paid and the 
 total amount in column "Total Disbursements." Then the items 
 of the total amount as they appear on the stub of the check book 
 should be entered in their respective columns. 
 
 Receipts and Disbursements shown by Deposit Slips and 
 check stubs need not be entered in the Cash Book at the time 
 of the transactions, but should be entered at some time during 
 the day on which the transactions occurred. 
 
 When a page is filled, the columns should be footed up 
 and the footings carried forward to the succeeding receipt or 
 disbursement page, as the case may be. Entries should then 
 be continued as before. 
 
 On the last day of each month all entries for the month 
 should be footed up regardless of whether the page is filled or 
 not, and the following month's entries begun on a new page. 
 
 The difference between the total Receipts and total Dis- 
 bursements for the month plus checks drawn but not cashed 
 should equal the balance of cash on hand and in bank. If it 
 does not, there is an error in the cash and steps should be taken 
 at once to trace and correct it. 
 

 
 
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ENTS 
 
 mth of. / 9 
 
 
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 CASH DISBURSEM 
 
 
 
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 sis 
 
 
 
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 60 
 
61 
 
 16. LEDGERS. 
 
 The books in which all transactions recorded in the Cash 
 Book are assembled and classified are called the Ledgers, the 
 classifications are called Accounts, and their transfer from the 
 Cash Book to the Ledger is called Posting. 
 
 INDIVIDUAL LEDGER. 
 
 The Individual Ledger contains the accounts which relate 
 to transactions with members or other persons with whom the 
 Credit Union may have dealings. These are known as In- 
 dividual Accounts, Their number is therefore unlimited. The 
 Individual Ledger should contain an alphabetical tab index at the 
 beginning and each account, when posted, should be immediately 
 indexed under the proper letter. 
 
 GENERAL LEDGER. 
 
 The General Ledger contains the accounts which relate 
 solely to the condition of the Credit Union, without reference 
 to the persons with whom the Credit Union deals. These are 
 called General Accounts. They are : 
 
 1. Cash — received and paid out. 
 
 2. Shares — redeemed and issued. 
 
 3. Deposits — withdrawn and received. 
 
 4. Accounts Payable — Obligations paid and obligations 
 incurred (money borrowed). 
 
 5. Accounts Receivable — Loans made to members and 
 repaid by them. 
 
 6. Interest — Paid and received. 
 
 7. Investments — Money in savings banks and other legal 
 investments. 
 
 8. Expenses — Expenses for whatever purpose. 
 
 9. Profit and Loss — Net interest less expenses and 
 losses. 
 
 10. Guaranty Fund — Reserve Income plus percentage set 
 aside from net profits to the Guaranty Fund. 
 
 11. Dividends — Declared and paid. 
 
 12. Surplus — Balance of Profits not put in Guaranty Fund 
 and not distributed in Dividends. 
 
1 
 
 
 
 «TlS 
 
 "ir 
 
 1 
 
 (INDIVIDUAL LEDGER) 
 
 ^'& 1 1 
 
 to 
 
 S 
 
 9 
 
 1 
 1 
 
 P[ 
 
 
 
 1 
 
 
 
 2 
 
 l2 
 
 
 
 M 
 
 
 
 
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 62 
 
(GENERAL LEDGER) CASH 
 
 Date 
 
 Item 
 
 C/B 
 
 Page 
 
 Received 
 
 Date 
 
 Item 
 
 C/B 
 Page 
 
 Paid 
 Out 
 
 Mo. 
 
 Dy. 
 
 Mo. 
 
 Dy. 
 
 
 
 Ca rried forwa rd. 
 
 
 
 
 
 
 Carried forward, 
 
 
 
 
 SHARES 
 
 Date 
 
 Item 
 
 C/B 
 Page 
 
 REDEEMED | 
 
 Date 
 
 Item 
 
 C/B 
 Page 
 
 ISSUED 1 
 
 Number 
 
 Amount 
 
 Isuiuber 
 
 Amount 
 
 Mo. 
 
 Dy. 
 
 Full 
 Paid 
 
 Part 
 Paid 
 
 Mo. 
 
 Dy. 
 
 Sub 
 sori'd 
 
 Full 
 Paid 
 
 
 
 Carried fivd.. 
 
 
 
 
 
 
 
 
 Carried fzvd.. 
 
 
 
 
 
 
 DEPOSITS 
 
 Date 
 
 Item 
 
 C/B 
 Page 
 
 With- 
 drawn 
 
 Date 
 
 Item 
 
 C/B 
 Page 
 
 Received 
 
 Mo. 
 
 Dy. 
 
 Mo. 
 
 Dy. 
 
 
 
 Carried forward^ 
 
 
 
 
 
 
 Carried forward. 
 
 
 
 
 ACCOUNTS PAYABLE 
 
 Date 
 
 Item 
 
 C/B 
 Page 
 
 Paid 
 
 Date 
 
 Item 
 
 C/B 
 Page 
 
 Incurred 
 
 Mo. 
 
 Dy. 
 
 Mo. 
 
 Dy. 
 
 
 
 Carried forwardf 
 
 
 
 A 
 
 3 
 
 
 Carried forward. 
 
 
 
 
(c.«.B*. .„CE«) ^Q^^g RECEIVABLE 
 
 Date 
 
 Item 
 
 C/B 
 Page 
 
 Made 
 
 Date 
 
 Item 
 
 C/B 
 Page 
 
 Repaid 
 
 Mo. 
 
 Dy. 
 
 Amount 
 
 Mo. 
 
 Dy. 
 
 Amount 
 
 
 
 Carried forward. 
 
 
 
 
 
 
 Carried forward. 
 
 
 
 
 INTEREST 
 
 Date 
 
 Item 
 
 C/B 
 Page 
 
 Paid 
 
 Date 
 
 Item 
 
 C/B 
 Page 
 
 Received 
 
 Mo. 
 
 Dy. 
 
 No. 
 
 Amount 
 
 Mo. 
 
 Dy. 
 
 Amount 
 
 
 
 Carried fivd.. 
 
 
 
 1 
 
 
 
 
 Carried forward. 
 
 
 
 
 INVESTMENTS 
 
 Date 
 
 Item 
 
 C/B 
 Page 
 
 Made 
 
 Date 
 
 Item 
 
 C/B 
 Page 
 
 Liqui- 
 dated 
 
 Mo. 
 
 Dy. 
 
 Mo. 
 
 Dy. 
 
 
 
 Carried forward. 
 
 
 
 
 
 
 Carried forward. 
 
 
 
 
 EXPENSES 
 
 Date 
 
 Item 
 
 C/B 
 Page 
 
 Paid 
 
 Date 
 
 Item 
 
 C/B 
 Page 
 
 Receipts 
 
 Mo. 
 
 Dy. 
 
 Mo. 
 
 Dy. 
 
 
 
 Carried forward. 
 
 
 
 6 
 
 4 
 
 
 Carried forward. 
 
 
 
 
 1 
 
ERRATA 
 
 (GENERAL LEDGER) 
 
 
 
 PROFIT & LOSS 
 
 
 
 
 
 1 
 
 Date 
 
 Item 
 
 Led. 
 Page 
 
 Net 
 Interest 
 
 Date 
 
 Item 
 
 Led. 
 Page 
 
 Deduc- 
 tions 
 
 Mo. 
 
 Dy 
 
 Mo. 
 
 Dy. 
 
 
 
 Carried fo rwa rd. 
 
 
 
 
 
 
 Carried forward. 
 
 
 
 
 GUARANTY FUND 
 
 Date 
 
 Item 
 
 Led. 
 Page 
 
 Putin 
 
 Date 
 
 Item 
 
 Led. 
 Page 
 
 Taken 
 Out 
 
 Mo. 
 
 Dy. 
 
 Mo. 
 
 Dy. 
 
 
 
 Carried forzvard. 
 
 
 
 
 
 
 
 Carried forward. 
 
 
 
 
 DIVIDEND 
 
 Date 
 
 Item 
 
 Led. 
 Page 
 
 Declared 
 
 Date 
 
 Item 
 
 Led 
 Page 
 
 Paid 1 
 
 Mo. 
 
 Dy. 
 
 No 
 
 Amount 
 
 Mo. 
 
 Dy. 
 
 No 
 
 Amount | 
 
 
 
 Carried fvjd. , 
 
 
 
 
 
 
 
 Carried fivd. , 
 
 
 
 
 
 SURPLUS 
 
 Date 
 
 Item 
 
 Led. 
 Page 
 
 Put In 
 
 Date 
 
 Item 
 
 Led. 
 Page 
 
 Taken 
 Out 
 
 Mo. 
 
 Dy. 
 
 Mo. 
 
 Dy. 
 
 
 Carried forward. 
 
 
 
 ^ 
 
 5 
 
 Carried forward. 
 
 
 
 
 
66 
 
 POSTING. 
 
 As the first eight General Accounts of the General Ledger 
 represent cash transactions; namely, cash received and cash 
 paid out, all that is needed in posting is to transfer at the end 
 of the month the footings from the Cash Book to their proper 
 accounts. These accounts should be posted once a month, as 
 of the last day of the month. The Ledger page should be noted 
 in the Cash Book underneath the amount transferred, thus — 
 
 L. P In the same manner the Cash Book page should 
 
 be noted in the Ledger column provided opposite the item posted. 
 These notations are important as they indicate that the items 
 have been posted. When these notations are absent, the pre- 
 sumption is that the items have not been posted. 
 
 The last four General Accounts do not represent cash trans- 
 actions (except the Reserve Income) but consist of transfers 
 from the other General Accounts, and cannot therefore be 
 posted until the other accounts are posted. 
 
 Posting into the Individual Accounts should be done as 
 soon as possible after the entry is made in the Cash Book so 
 that these accounts may alw^ays be up-to-date. At the time 
 of posting the Ledger page of each item should be noted in 
 the Cash Book and the Cash Book page noted in the Ledger. 
 
 If the posting is properly done, the sum of the credits of 
 the General Accounts and the sum of the debits of the General 
 Accounts will equal. The footing up of the General Accounts 
 is called taking a Trial Balance and proves the correctness of 
 the entries. If the Trial Balance is found correct, a balance 
 sheet, a statement of assets and liabilities, or any other financial 
 statement, can safely be drawn from the Ledger. 
 
67 
 
 THE.. 
 
 17. STATEMENT 
 
 OF 
 CREDIT UNION. 
 
 (organized. 
 
 for the period from 19. 
 
 .to. 
 
 .19. 
 
 CONDENSED STATEMENT OF TRANSACTIONS 
 
 19. 
 
 Number 
 
 Amount 
 
 19. 
 
 Number Amount 
 
 Increase 
 Decrease 
 
 Number 
 
 Increase 
 Decrease 
 
 Amount 
 
 Members 
 
 Shares subscribed 
 Shares paid 
 Loans made 
 Loans repaid 
 Deposits 
 Interest earned 
 Interest collected 
 
 CONDENSED BALANCE SHEET 
 
 ASSETS 
 
 LIABILITIES 
 
 Cash 
 
 Loans receivable 
 
 Investments 
 
 Interest on loans, due 
 
 and accrued 
 Interest on balances 
 
 in bank, accrued 
 
 Shares 
 Deposits 
 Loans payable 
 Surplus, Jan. 19. 
 Reserve Fund 
 
 Surplus for year 
 
 CONDENSED INCOME ACCOUNT 
 
 EARNINGS 
 
 EXPENDITURES 
 
 19., 
 
 19. 
 
 Interest on loans 
 Interest on balances 
 in banks 
 
 Interests on deposits 
 Interests on loans 
 Operatins: expense 
 Losses 
 
 To reserve fund 
 Dividends 
 Surplus for year 
 
 Treasurer. 
 
 This is to certify that we have on. 
 
 191 
 
 •examined the books 
 
 of account, notes and other securities, vouchers, etc., of the- 
 Credit Union and find the above statement to be correct. 
 
 Supervisory 
 Committee. 
 
68 
 
 NEW YORK CREDIT UNION LAW. 
 
 (Article XI, Chap. 369, Laws of 1914.) 
 
 Section 450. Incorporation; organization certificate. 
 
 451. Proposed by-laws. 
 
 452. When corporate existence begins; conditions precedent to 
 
 commencing business. 
 
 453. General powers. 
 
 454. Limitations upon powers. 
 
 455. Capital. 
 
 456. Deposit of funds; preference. 
 
 457. Guaranty fund. 
 
 458. Calculation of earnings. 
 
 459. Dividends. 
 
 460. Change of location. 
 
 461. Exemptions and liability of shareholders. 
 
 462. Reduction of liability to shareholders. 
 
 463. Withdrawal and expulsion of members. 
 
 464. Meetings of shareholders. 
 
 465. Qualifications of directors. 
 
 466. Oaths of directors, officers and committee members. 
 
 467. Tenure of office of directors. 
 
 468. Powers and duties of directors. 
 
 469. Special duties of directors. 
 
 470. Credit committee. 
 
 471. Supervisory committee. 
 
 472. Officers. 
 
 473. Amendment of by-laws. 
 
 474. Credit union not liable to taxation. 
 
 475. Fiscal year. 
 
 476. Communications from banking department. 
 
 477. Reports to superintendent. 
 
 478. Penalty for loans to non-members. 
 
 479. Penalty for use of term "Credit Union." 
 
 § 450. Incorporation; organization certificate. 
 
 When authorized by the superintendent of banks as provided in sec- 
 tion twenty-three of this chapter,* seven, or more persons employed or 
 
 * S3. InveBtigation hy superintendent of proposed corporation, private banker 
 or personal loan broker; refusal or approval; filing: certificate. 
 
 When any such certificate shall have been filed for examination, the super- 
 intendent shall thereupon ascertain from the best sources of information at his 
 command, and by such investigation as he may deem necessary, whether the 
 character, responsibility and general fitness of the person or persons named in 
 such certificate are such as to command confidence and warrant belief that the 
 business of the proposed corporation, private banker or personal loan broker will 
 be honestly and efficiently conducted in accordance with the intent and purpose of 
 this chapter, and whether the public convenience and advantage will be promoted 
 by allowing such proposed corporation, private banker or personal loan broker to 
 engage or continue in business. 
 
 After the superintendent shall have satisfied himself by such investigation 
 whether it is expedient and desirable to permit such proposed corporation, private 
 banker or personal loan broker to engage or continue in business, he shall within 
 sixty days after the date of the filing of such certificate for examination, endorse 
 upon each of the duplicates thereof over his official signature the word "approved" 
 or the word "refused," with the date of such endorsement. In case of refusal 
 he shall forthwith return one of the duplicates, so endorsed, to the proposed in- 
 corporators, private banker or personal loan broker from whom such certificate 
 was received. In case of approval he shall forthwith give notice thereof to the 
 proposed incorporators, private banker or personal loan _ broker and file one of 
 the duplicate certificates in his own office and the other in the office of the clerk 
 of the county in which is located the place of business of such proposed corpora- 
 tion, private banker or personal loan broker. 
 
69 
 
 residing in the State of New York may form a corporation to be known 
 as a credit union. Such persons shall subscribe and acknowledge and 
 submit to the superintendent of banks at his office an organization cer- 
 tificate in duplicate which shall specifically state: 
 
 1. The name of the corporation which shall include the words 
 "credit union." 
 
 2. The place where its business is to be transacted. If the condi- 
 tion of membership is employment of its members by a certain individual, 
 partnership or corporation, the place of business of such individual, 
 partnership or corporation may be stated as the place of business of such 
 credit union. 
 
 3. The par value of the shares, which shall not exceed twenty-five 
 dollars. 
 
 4. The full name, residence and post office address of each of the 
 incorporators and the number of shares subscribed for by each. 
 
 5. The term of its existence, which may be perpetual. 
 
 6. The number of its directors which shall not be less than five, 
 and the names and addresses of the incorporators who shall be its 
 directors until the first annual meeting of shareholders. 
 
 § 451. Proposed by-laws. 
 
 The incorporators shall subscribe and acknowledge and submit to 
 the superintendent of banks at his office proposed by-laws, in duplicate, 
 which shall prescribe the manner in which the business of the credit 
 union shall be conducted with reference to the following matters : 
 
 1. The purposes of the corporation. 
 
 2. The qualifications for membership. 
 
 3. The date during the month of January of the annual meeting; 
 the manner of conducting meetings; the method by which members shall 
 be notified of meetings, and the number of members which shall constitute 
 a quorum. 
 
 4. The number of directors necessary to constitute a quorum, and 
 the compensation and duties of officers elected by the directors. 
 
 5. The powers and duties of the credit committee and the number 
 of members, not less than three, of which it shall be composed. 
 
 6. The powers and duties of the supervisory committee and the 
 number of members, not less than three, of which it shall be composed, 
 
 7. The conditions upon which shares may be issued, paid for, trans- 
 ferred and withdrawn. 
 
 8. The fines, if any, which shall be charged for failure punctually 
 to meet obligations to the corporation. 
 
 9. The conditions upon which deposits may be received and with- 
 drawn. 
 
 10. The manner in which the funds of the corporation shall be 
 employed. 
 
 11. The conditions upon which loans may be made and repaid. 
 
 12. The maximum rate of interest that may be charged upon loans. 
 
70 
 
 13. The method of receipting for money paid on account of shares, 
 deposits or loans. 
 
 14. The manner in which the guaranty fund shall be accumulated. 
 
 15. The manner in which dividends shall be determined and paid 
 to members. 
 
 16. Whether the members shall be equally and ratably liable for 
 the payment of the debts of the corporation, 
 
 § 452. When corporate existence begins; conditions precedent to 
 commencing business. 
 
 When the superintendent of banks shall have endorsed his approval 
 on the organization certificate, as provided by section twenty-three of 
 this chapter, the corporate existence of the credit union shall begin, and 
 it shall then have power to elect officers and to transact such other 
 business as relates to its organization. But it shall transact no other 
 business, until the superintendent shall have duly issued to it the authori- 
 zation certificate specified in section twenty-four of this chapter.* 
 
 § 453. General powers. 
 
 In addition to the powers conferred by the general corporation law 
 a credit union shall, subject to the restrictions and limitations contained 
 in this article and in its by-laws, have the following powers : 
 
 1. To issue shares to persons qualified for membership. 
 
 2. To charge an entrance fee to subscribers for such shares. 
 
 3. To charge a reasonable fee for the transfer of its shares. 
 
 * 2i. Authorization certificate; when and to whom issued; contents; filing 
 and recording. 
 
 Before authorizing any corporation, private banker or personal loan broker to 
 begin or continue business the superintendent shall be satisfied that such corporation, 
 banker or broker has in good faith complied with all the requirements of law 
 and fulfilled all the conditions precedent to commencing business imposed by this 
 chapter. In the case of every stock corporation, he shall examine or cause an 
 examination to be made in order to ascertain whether all of its capital stock has 
 been fully paid in cash. In the case of every personal loan broker and of every 
 private banker subject to all the provisions of article four of this chapter, he 
 shall examine or cause an examination to be made in order to ascertain whether 
 there has been invested in such business, or deposited in cash to be invested 
 therein, the amount of permanent capital stated in the certificate of such banker 
 or broker. 
 
 If satisfied that such corporation, banker or broker has in good faith complied 
 with all the requirements of law and fulfilled ail the conditions precedent to com- 
 mencing business imposed by this chapter, the superintendent shall, within six 
 months after tthe date on which such organization certificate or private banker's 
 or personal loan broker's certificate was filed by him for examination, but in no 
 case after the expiration of that period, issue under his hand and official seal, in 
 triplicate, an authorization certificate to the person or persons named in such 
 organization certificate or private banker's or personal loan broker's certificate. 
 Such authorization certificate shall state that the corporation, private banker or 
 personal loan broker named therein has complied with the provisions of this 
 chapter and with all the requirements of law, that it is authorized to transact 
 within this state the business specified therein, and that such business can safely be 
 intrusted to it. One of the triplicate authorization certificates shall be transmitted 
 by the superintendent to the corporation, private banker or personal loan broker, 
 thereby authorized to commence or continue business, another shall be filed in the 
 office of the superintendent, and the third shall be filed by the superintendent in 
 the county clerk's office wherein the organization certificate of such corporation _ or 
 the private banker's or personal loan broker's certificate has been filed by him. 
 The superintendent and said county clerk shall respectively attach such authoriza- 
 tion certificate to such organization certificate or private banker's or personal loan 
 broker's certificate previously filed in his office and shall record both such cer- 
 tificates in the book of records of incorporation therein. 
 
to Sec. 453 (Chapter 294, Laws oi Ly.=>,- 
 
 14 To invest any moneys received by it and not 
 lent to its members in the securities which are authorized 
 as LvestmenTs for savings banks by subdivisions one 
 t4o Three, four, five and seven of section two hundred 
 thirty -nine of this chapter. "* 
 
 _. -^ .v,..^ xiiKJiicy Lo US members upon such terms and conditions 
 as the by-laws provide and as the credit committee shall approve, at 
 rates not exceeding one per centum per month, inclusive of all charges 
 incident to the making of such loan. 
 
 6. To deposit any moneys received by it and not lent to members, 
 as provided in section four hundred and fifty-six of this article. 
 
 7. To borrow money to an amount not exceeding forty per centum 
 of the capital of such corporation, except where the capital is five 
 thousand dollars or less, in which event such credit union may borrow 
 any amount up to two thousand dollars. 
 
 8. To reduce its liability to shareholders as provided in section four 
 hundred and sixty-two of this article. 
 
 9. To fine members for failure to meet punctually obligations to 
 such credit union. 
 
 10. To expel members, as provided in section four hundred and 
 sixty-three of this article. 
 
 11. To impress a lien upon the shares and dividends of any mem- 
 ber to the extent of any loans made to him and for any dues or fines 
 payable by him. 
 
 12. To cancel the shares of any member who withdraws or is ex- 
 pelled, and apply the withdrawal value thereof to the liquidation of such 
 member's indebtedness to the corporation. 
 
 13. To hold shares in and make deposits with other credit unions. 
 
 § 454. Limitations upon powers. 
 
 No credit union shall: 
 
 1. Pay any commission or compensation for securing members or 
 for the sale of its shares. 
 
 2. Make any loan in excess of fifty dollars unless security therefor 
 is taken. The term "security" within the meaning of this subdivision 
 shall include an endorsed note. 
 
 3. Impose a fine, in case of failure of a member to make payments 
 on shares, exceeding two per centum per month or fraction of a month 
 on amounts due, except that a minimum fine of five cents per month 
 or fraction thereof may be imposed. 
 
 4. Permit any director, officer or member of the credit committee 
 or supervisory committee to borrow directly or indirectly or become 
 surety for any loan or advance made by the corporation, unless such 
 loan shall have been approved at a regularly called meeting of the mem- 
 bers of the corporation by a majority vote of those present, and the 
 notice of such meeting shall have stated that the question of loans to 
 directors, officers or members of committees would be considered at such 
 meeting. 
 
 5. Issue shares or accept deposits in trust, except in the name of 
 the trustee, as such, for a specified beneficiary whose residence shall be 
 disclosed to the credit union by such trustee. 
 
72 
 
 6. Issue any shares except to those qualified for membership under 
 its by-laws, and unless there is printed upon the certificate or other 
 evidence of such shares the words "transferable only to qualified mem- 
 bers." 
 
 7. Lend to any of its members without requiring at the time of 
 such loan a surrender and pledge of any certificates or other evidences 
 of membership, issued by such credit union to the member to whom 
 such loan is to be made. 
 
 § 455. Capital. 
 
 The capital of a credit union shall consist of the payments made by 
 members on shares, and unpaid dividends credited thereon. 
 
 § 456. Deposit of funds; preference. 
 
 The capital, deposits, undivided profits and guaranty fund of any 
 credit union may be deposited in one or more savings banks, state banks or 
 trust companies, incorporated under the laws of the State of New York, 
 or in national banks located in the state. Funds deposited in a state 
 bank or trust company shall, in the event of the liquidation of such 
 depositary, be entitled to priority of payment to the same extent as 
 deposits of savings banks as provided in section two hundred and 
 seventy-eight of this chapter.* 
 
 § 457. Guaranty fund; how created and regulated. 
 
 Every credit union shall create a guaranty fund which shall in no 
 case exceed the capital of the corporation, plus fifty per centum of its 
 other liabilities, and which shall be held to meet contingencies until the 
 corporation is dissolved, when it may be distributed among the share- 
 holders. 
 
 Such guaranty fund shall be created and regulated as follows : 
 
 1. All entrance fees, transfer fees and fines remaining after the 
 payment of organization expenses shall be set aside to such fund. 
 
 2. At the close of each fiscal year twenty-five per centum of the 
 net earnings of the corporation for the year shall be carried to such 
 fund, provided that, upon the recommendation of the board of directors, 
 the shareholders, at the annual meeting, may increase or, if such fund 
 equals or exceeds its capital, may decrease the proportion of net earnings 
 to be thus set aside. 
 
 3. Any sums recovered on items previously charged to it shall be 
 credited to such fund. 
 
 Losses incurred by a credit union may be charged to its guaranty 
 fund. 
 
 * 278. Preference of deposits made by savings bank. 
 
 All the property of any bank or trust company which shall become insolvent, 
 shall be applied by the trustees, assignees or receivers thereof, or by the super- 
 intendent of banks if such insolvent bank or trust company is being liquidated by 
 him under the provisions of section fifty-seven of this chapter, in the first place 
 ratably and proportionately to the payment in full of any sum or sums of money 
 deposited therewith by any savings bank, savings and loan association or credit 
 union, but not to an amount exceeding that authorized to be so deposited by the 
 provision of this chapter, and subject to any other preference provided for in the 
 charter of any such bank or trust company. 
 
73 
 
 § 458. Calculation to determine whether dividends may be declared 
 and amount thereof. 
 On or after the date of the close of each fiscal year, in order to 
 determine whether a dividend may be declared, and the amount thereof, 
 the earnings from all sources, may be credited to the credit union's profit 
 and loss account and the following items shall be charged against such 
 account : 
 
 1. All expenses paid or incurred of whatever nature in the man- 
 agement of its affairs, the collection of its debts or the transaction of 
 its business, 
 
 2. The interest paid, or accrued and unpaid, on debts owing by it. 
 
 3. All losses sustained by it in excess of its guaranty fund. 
 
 The credit balance of the profit and loss account as thus determined 
 shall constitute the undivided profits of the credit union at the close 
 of such period, and shall be applicable to the payment of dividends ex- 
 cept as provided in the next succeeding section. 
 
 § 459. Dividends to shareholders; how often and from what pay- 
 able; conditions precedent. 
 
 The directors of any credit union may, at the close of each fiscal 
 year, declare such dividend from its undivided profits as they shall 
 judge expedient. But no credit union shall declare, credit or pay any 
 dividend to its shareholders until it shall have: 
 
 1. Made good any existing impairment of its capital. 
 
 2. Carried to its guaranty fund such part of its net earnings as is 
 required by section four hundred fifty-seven of this article. 
 
 Only fully paid shares shall be entitled to dividends, and shares 
 which shall have been fully paid during any year in which dividends 
 were declared shall be entitled only to a proportionate part of such 
 dividends calculated from the first day of the month following such 
 payment in full. 
 
 § 460. Change of location. 
 
 Any credit union may make a written application to the superin- 
 tendent of banks for leave to change its place of business to another 
 place in the same county. The application shall state the reasons for 
 such proposed change, and shall be signed and acknowledged by a 
 majority of its board of directors and accompanied by the written assent 
 thereto of at least two-thirds of its shareholders. If the proposed place 
 of business is within the limits of the village, borough or city, if in a 
 city not divided into boroughs, in which the place of business of the credit 
 union is located, such change may be made upon the written approval 
 of the superintendent; if beyond such limits, notice of intention to make 
 such application, signed by two principal officers of the credit union shall 
 be published once a week for two successive weeks immediately preceding 
 such application in a newspaper published in the city of Albany in which 
 notices by state officers are required by law to be published, and in a 
 newspaper to be designated by the superintendent, published in the 
 
74 
 
 county in which the present place of business of such credit union is 
 located. If the superintendent shall grant his certificate authorizing the 
 change of location, as provided in section fifty of this chapter,* the 
 credit union shall cause such certificate to be published once in each 
 week for two successive weeks in the newspapers in which the notice 
 of application was published. When the requirements of this section 
 shall have been fully complied with, the credit union may, upon or after 
 the day specified in the certificate, remove its property and effects to 
 the location designated therein, and thereafter its place of business shall 
 be the location so specified; and it shall have all the rights and powers 
 in such new location which it possessed at its former location. 
 
 § 461. Exemptions and individual liability of shareholders. 
 
 The shares of members of any credit union and all the accumula- 
 tions on such shares shall be exempt from sale on execution and pro- 
 ceedings supplementary thereto to the amount of six hundred dollars. 
 The transfer of such shares shall not be taxable under the provisions 
 of article twelve of the tax law. 
 
 Unless the by-laws so provide the shareholders of such a credit 
 union shall not be individually liable for the payment of its debts. 
 
 § 462. Reduction of liability to shareholders. 
 
 Whenever the losses of any such credit union resulting from a 
 depreciation in the value of its securities or otherwise exceed its undi- 
 vided profits and guaranty fund, so that the estimated value of its assets 
 is less than the total amount due its shareholders, the board of directors 
 may, with the written approval of the superintendent of banks, order 
 a reduction of the liability to each of its shareholders, so as to divide 
 the loss equitably among such shareholders. If thereafter the credit 
 union shall realize from such assets a greater amount than was fixed 
 in the order of reduction, such excess shall be divided among the share- 
 holders whose assets were reduced, but to the extent of such reduction 
 only. 
 
 * 64). Change of location; approval or refusal; certificate. 
 
 Upon receipt by the superintendent of a written application from any corporation 
 or private or individual banker or personal loan broker to which this chapter is 
 applicable for leave to change its place of business to another plac« in the same 
 county and within the limits of the village, borough or city, if in a city not 
 divided into boroughs, in which its principal place of business is then located, 
 the superintendent shall, if he shall be satisfied that there is no reasonable objec- 
 tion to such change of location, give his written approval of the proposed change. 
 If the proposed place of business is without such limits, the superintendent shall 
 designate for the publication of the notice of intention to make such application a 
 newspaper published in the county in which such place of business is located. 
 Upon receipt by the superintendent of evidence satisfactory to him of due publica- 
 tion of such notice, he shall, if satisfied that there is no reasonable objection to 
 such change of location, make a certificate in triplicate under his hand and official 
 seal authorizing such change and specifying the date on or after which, and the 
 place to which such change may be made, and shall file one thereof in his own 
 office, one in the office of the clerk of such county, and shall transmit the other 
 to such applicant. If the superintendent shall be satisfied in any case that such 
 change is undesirable or inexpedient, he shall refuse such application and notify 
 such corporation or banker of his determination. 
 
75 
 
 § 463. Manner of withdrawal and expulsion of members; effect upon 
 liabilities to credit union. 
 
 A member desiring to withdraw from a credit union shall file a 
 written notice of his intention to withdraw. The board of directors 
 may expel any member who has not carried out his engagements with 
 the credit union, or who has been convicted of a criminal offense, or 
 who neglects or refuses to comply with the provisions of this article, 
 or of the by-laws, or who habitually neglects to pay his debts, or who 
 becomes insolvent or bankrupt. The members at any regularly called 
 meeting may expel any member whose private life is! a source of scandal. 
 But no member shall be expelled until he has been informed in writing 
 of the charges against him and shall have had reasonable opportunity 
 to be heard. 
 
 Any member of a credit union who withdraws or is expelled shall 
 not be relieved of any liability to the corporation. The amounts paid 
 in on shares or deposited by such members, together with any dividends 
 credited to their shares and any interest which has accrued on their de- 
 posits, shall be repaid to them in the order of their withdrawal or ex- 
 pulsion, as funds become available therefor, but the credit union may 
 deduct from such payments any sums due it from such members. 
 
 § 464. Meetings of shareholders; voting. 
 
 At all meetings of shareholders of every credit union each share- 
 holder shall have one vote irrespective of the number of shares which 
 he holds, and no shareholder may vote by proxy. At any annual or 
 special meeting a decision of the board of directors may be overruled 
 by a majority vote of all the shareholders. 
 
 1. Annual meeting. An annual meeting for the election of direc- 
 tors, a credit committee and a supervisory committee shall be held 
 during the month of January upon such notice and at such time and 
 place as the by-laws provide. 
 
 2. Special meetings. At the request of ten members, or by order 
 of the directors or the supervisory committee, special meetings may be 
 held, after notice to the members as provided in the by-laws. 
 
 § 465. Qualifications and disqualifications of directors. 
 
 Every director of a credit union shall be a shareholder in his own 
 right; and every person elected to be a director, who, after such election, 
 shall hypothecate, pledge or cease to be the owner in his own right 
 of his qualifying share shall thereby vacate his office, and shall not be 
 eligible for re-election as a director for a period of one year from the 
 date of the next succeeding annual meeting. 
 
 § 466. Oaths of directors, officers and members of committees. 
 
 Each director, officer and member of committee when appointed or 
 elected, shall take an oath that he will, so far as the duty devolves 
 upon him, diligently and honestly administer the affairs of the credit 
 union, and will not knowingly violate, or willingly permit to be violated, 
 
7(i 
 
 any of the provisions of law applicable to such corporation, and that he 
 is the owner in good faith and in his own right, of at least one share 
 subscribed for by him or standing in his name on the books of the 
 credit union and that the same is not hypothecated, or in any way pledged 
 as security for any loan or debt, and, in case of re-election, that such 
 share was not hypothecated, or in any way pledged as security for any 
 loan or debt during his previous term. Such oath shall be subscribed by 
 the directors, officers and members of committees making it, and cer- 
 tified by an officer authorized by law to administer oaths, and imme- 
 diately transmitted to the superintendent of banks. 
 
 § 467. Tenure of office of directors. 
 
 The directors, unless sooner disqualified or removed, shall hold office 
 until the next annual meeting of shareholders after their election and 
 until their successors are elected and have qualified. 
 
 § 468. Powers and duties of directors; not entitled to compensation. 
 
 The board of directors of every credit union shall have the general 
 management of the affairs, funds and records of the corporation. The 
 directors shall hold an annual meeting within ten days after the annual 
 meeting of shareholders for the purpose of electing a president, vice- 
 president, secretary and treasurer of the corporation. 
 
 If the by-laws so provide the directors may elect the same person 
 as secretary and treasurer. 
 
 No member of the board of directors shall receive any compensa- 
 tion for his services as a member of said board. 
 
 Whenever the directors shall deem any loan unsafe they may, in 
 their discretion, reqiure additional security to be given by the borrower, 
 and if such security is not furnished as required by them, they may 
 declare the loan due and take action to collect the same. 
 
 § 469. Special duties of directors. 
 
 Unless the by-laws shall expressly reserve any or all of the fol- 
 lowing duties to the shareholders, it shall be the special duty of the 
 directors : 
 
 1. To act upon all applications for membership and to expel 
 members. 
 
 2. To fix the amount of surety bond required of each officer hav- 
 ing the control or custody of funds. 
 
 3. To determine from time to time the rate of interest which shall 
 be allowed on deposits and charged on loans. 
 
 4. To fix the maximum number of shares which may be held by, 
 and the maximum amount which may be lent to any one member. 
 
 5. To declare dividends. 
 
 6. To recommend amendments to the by-laws. 
 
 7. To fill vacancies in the board of directors or in the credit com- 
 mittee. 
 
 8. To direct the deposit or investment of funds, except loans to 
 members, and to perform such other duties as the by-laws may prescribe. 
 
77 
 
 § 470. Credit committee; duties. 
 
 The credit committee of every credit union shall meet as often 
 as necessary, after due notice has been given to each member, for the 
 purpose of passing upon applications of members for loans and advances. 
 Every such application must be made in writing and must state the 
 purpose for which the loan is desired and the security offered. No loan 
 shall be made unless the application has received the unanimous approval 
 of the members of the committee present at the meeting, provided that a 
 majority of the committee shall be present. 
 
 Any applicant for a loan may appeal from the decision of the credit 
 committee to the board of directors. 
 
 In no case shall a member of the credit committee receive any com- 
 pensation for his services as a member of such committee, or serve as 
 a member of the supervisory committee. 
 
 If a credit union is located elsewhere than in a city, its board of 
 directors may, if the by-laws so provide, act as its credit committee. 
 
 § 471. Supervisory committee; powers and duties. 
 
 The supervisory committee shall have power: 
 
 1. To suspend at any time by unanimous vote, at a meeting called 
 for that purpose, the credit committee or any member of the board 
 of directors or any officer. 
 
 2. By a majority vote to call a meeting of the shareholders to 
 consider any violation of this article or the by-laws, or any practices 
 of the credit union which, in the opinion of the committee, are unsafe 
 or unauthorized. 
 
 It shall be the duty of the supervisory committee: 
 
 1. To inspect the securities, cash and accounts of the credit union 
 and supervise the acts of its board of directors, officers and credit 
 committee. 
 
 2. Within seven days after the suspension of the credit committee, 
 to cause notice of a special meeting to be given to the shareholders to 
 take action regarding such suspension as may be deemed necessary. 
 
 3. To fill vacancies in the supervisory committee until the next annual 
 meeting of the shareholders. 
 
 4. At the close of each fiscal year to make an audit of the books 
 and records and an examination of the business and affairs of the 
 credit union for the year and to make a full report of its assets and 
 liabilities, receipts and disbursements to the board of directors, and to 
 cause such report to be read at the annual meeting of shareholders and 
 filed with the records of such credit union. 
 
 In no case shall a member of the supervisory committee receive any 
 compensation for his services as a member of such committee, or serve 
 as a member of the credit committee, 
 
 § 472. Officers; powers, duties and compensation. 
 
 The powers, duties and compensation of the officers of any credit 
 union shall be such as are prescribed in the by-laws. 
 
78 
 
 § 473. Amendment of by-laws; approval of superintendent of banks. 
 
 The by-laws of a credit union may be changed or amended by a 
 three-fourths vote of the shareholders present at any meeting; provided 
 the proposed change of amendment shall have first had the approval 
 of the superintendent of banks; and provided further, that notice of 
 such meeting, containing a true copy of the proposed change or amend- 
 ment, shall have been given to each shareholder as prescribed in the 
 by-laws. A copy of any change or amendment thus adopted shall be 
 filed in the office of the superintendent of banks within thirty days after 
 its adoption. Any credit union deeming itself aggrieved by the refusal 
 of the superintendent of banks to give his approval to a proposed change 
 or amendment, may apply to any justice of the supreme court of the 
 district wherein the credit union is located, upon notice to the superin- 
 tendent of banks, for a review of such decision. Such justice shall re- 
 view the decision of the superintendent and may overrule or set aside 
 the action of the superintendent and approve such change or amendment. 
 An approval thus obtained shall enable such credit union to make the 
 change or amendment as approved. 
 
 § 474. Credit union not liable for taxation. 
 
 Any credit union subject to the provisions of this article shall be 
 deemed an institution for savings within the meaning of the law which 
 exempts such institutions from taxation. No law which taxes corpora- 
 tions in any form, or the shares thereof or the accumulations therein, 
 shall apply to corporations doing business in accordance with the pro- 
 visions of this article, unless such corporations are specifically named 
 in said law. 
 
 § 475. Fiscal year. 
 
 The fiscal year of every credit union shall end at the close of busi- 
 ness on the thirty-first day of December. 
 
 § 476. Communications from banking department must be submitted 
 to directors and supervisory committee, and noted in minutes. 
 
 Each official communication directed by the superintendent of banks 
 or one of his deputies to a credit union or to any officer thereof, relating 
 to an investigation or examination conducted by the banking depart- 
 ment or containing suggestions or recommendations as to the conduct 
 of the business of the credit union, shall be submitted, by the officer 
 receiving it, to the board of directors and to the supervisory committee 
 at the next meeting of such board or committee and duly noted in the 
 minutes of the meetings of such board, or committee. 
 
 § 477. Reports to superintendent; penalty for failure to make. 
 
 On or before the first day of February in each year, every credit 
 union shall make a written report to the superintendent of banks which 
 shall contain a statement of its condition on the morning of the first 
 day of January in said year and shall be in the form and contain the 
 
79 '■...;:-\.S\''.;:\^\'\\t 
 
 matters prescribed by the superintendent. Every such report shall be 
 verified by the oaths of the president, treasurer, secretary, and a majority 
 of the members of the supervisory committee. The verification shall 
 state that the report is true and correct in all respects to the best of 
 the knowledge and belief of the persons verifying it, and that the usual 
 business of the credit union has been transacted at the location required 
 by this article and not elsewhere. 
 
 Every such credit union shall also make such other special reports 
 to the superintendents as he may from time to time require, which shall 
 be in such form and filed at such date as may be prescribed by the 
 superintendent and shall, if required by him, be verified in such manner 
 as he may prescribe. 
 
 If any such credit union shall fail to make any report required by 
 this section on or before the day designated for the making thereof, or 
 shall fail to include therein any matter required by the superintendent, 
 such credit union shall forfeit to the people of the state the sum of five 
 dollars for every day that such report shall be delayed or withheld, and 
 for every day that it shall fail to report any such omitted matter, unless 
 the time therefor shall have been extended by the superintendent as 
 provided by section forty-nine of this chapter.* 
 
 § 478. Penalty for loans to non-members; recovery. 
 
 Any officer, director or member of a committee of a credit union 
 who knowingly permits a loan to be made or participates in a loan to 
 a non-member of the corporation shall be guilty of a misdemeanor and 
 shall be primarily liable to the corporation for the amount thus illegally 
 loaned, and the illegality of such a loan shall be no defense in any 
 action by the corporation to recover the amount lent. 
 
 § 479. Penalty for use of term "Credit Union." 
 
 The use by any person, partnership, association or corporation, other 
 than those authorized as provided in this article, of any name or title 
 which contains the two words "credit" and "union" shall be a misde- 
 meanor. 
 
 * 49. Extensions of time by snperintendent. 
 
 For satisfactory cause to him shown, the superintendent may grant extensions 
 of time to corporations or private or individual bankers or personal loan brokers 
 to which this chapter is applicable, as follows: 
 
 1. He may extend for not more than one year the time within which any 
 such corporation may commence business. Such extension shall only be made by 
 an order under his hand and official seal which shall be executed in triplicate 
 and one copy thereof shall be filed in the superintendent's office, one in the office 
 of the clerk of the county in which the organization certificate of such corporation 
 has been filed, and the third shall be transmitted to such corporation. 
 
 2. He may extend for not exceeding ten days in the case of a bank, trust 
 company, private banker or individual banker, and for not exceeding twenty days 
 in the case of any other corporation to which this chapter is applicable or of a 
 personal loan broker, the time within which any such corporation, banker or broker 
 is required to make and file any report to the superintendent. 
 
 3. He may extend for such period as he may deem proper the time within 
 which any corporation or private or individual banker is required by this chapter 
 to dispose of real estate held by it. 
 
PUBLICATIONS 
 
 DISTRIBUTED BY DIVISION OF REMEDIAL LOANS 
 
 RUSSELL SAGE FOUNDATION. 
 
 RLl The Salary Loan Business in New York City, 1908. By Clarence 
 W. Wassam, Ph.D., 148 pp. Report prepared under 
 direction of Bureau of Social Research of New York School 
 of Philanthropy. Published by Russell Sage Foundation.* 
 
 RL2 The Chattel Loan Business. 1909. By A. H. Ham. 60 pp. 
 Report prepared under direction of Bureau of Social Re- 
 search of New York School of Philanthropy. Published 
 by Russell Sage Foundation.* 
 
 RL3 Proceedings, National Federation of Remedial Loan Associations, 
 Buffalo, N. Y. June, 1909. 80 pp. Published by National 
 Federation of Remedial Loan Associations.* 
 
 RL4 Proceedings, National Federation of Remedial Loan Associa- 
 tions, St. Louis, Mo. May, 1910. 60 pp. Published by 
 National Federation of Remedial Loan Associations.* 
 
 RL5 Proceedings, National Federation of Remedial Loan Associa- 
 tions, Boston, Mass. June, 1911. 100 pp. Published by 
 National Federation of Remedial Loan Associations.* 
 
 RL6 Remedial Loans as Factors in Family Rehabilitation. Jan., 
 1912. By A. H. Ham. 8 pp. Reprinted from Proceedings of 
 the National Conference of Charities and Correction, Boston, 
 1911, by Division of Remedial Loans.* 
 
 RL7 Remedial Loans — A Constructive Program. Jan., 1912. By 
 A. H. Ham. 44 pp. Reprinted from Proceedings of the 
 Academy of Political Science, Jan., 1912, Vol. 11, No. 2, 
 by Division of Remedial Loans.* 
 
 RL8 Campaign against the Loan Shark. Jan., 1912. By A. H. 
 Ham. 2 pp. Published by Division of Remedial Loans. 
 
 RL9 Leaflet on Moving Picture Film, "The Usurer's Grip." 
 Oct., 1912. By A. H. Ham. Published by Division of 
 Remedial Loans. 
 
 RLIO Bulletin Vol. I, No. 1, National Federation of Remedial 
 Loan Associations, July, 1912. 60 pp. Published by 
 National Federation of Remedial Loan Associations. 
 
 RLll Work of the Remedial Loan Societies, 1911-1912. July, 1912. 
 (Statistical Folder). Published by National Federation of 
 Remedial Loan Associations. 
 
 RL12 Bulletin Vol. H, No. 1, National Federation of Remedial Loan 
 Associations, August, 1913. 104 pp. Published by National 
 Federation of Remedial Loan Associations. 
 
 RL13 Work of the Remedial Loan Societies, 1912-1913. August, 1913. 
 (Statistical Folder). Published by National Federation of 
 Remedial Loan Associations. 
 
 RL14 The Loan Shark Campaign. April, 1914. By Malcolm W. Davis. 
 8 pp. Reprinted from the New York Evening Po3t, 
 April 10, 1914, by Division of Remedial Loans. 
 
 RL15 A Credit Union Primer. August, 1914. By A. H. Ham, and L. G. 
 Robinson. 88 pp. Published by Division of Remedial Loans. 
 
 RL16 The Cooperative People's Bank. August, 1914. By M. Alphonse 
 Desjardins. 56 pp. Published by Division of Remedial 
 Loans. 
 
 Out of print. 
 
GIFT 
 NOV 19 1915 
 
 RL 19 
 
 CREDIT UNIONS AND THEIR RELATION 
 
 TO SAVINGS AND LOAN 
 
 ASSOCIATIONS 
 
 ARTHUR H. HAM 
 
 
 / 
 
 Address Delivered before the 
 
 State League of Savings and Loan Associations, 
 
 Port Jervis, N. Y. 
 
 June 10, 1915 
 
 Division of Remedial Loans 
 
 Russell Sage Foundation 
 
 130 East 22nd Street, New York City 
 
SOME PUBLICATIONS ON COOPERATIVE CREDIT 
 
 ISSUED BY 
 
 RUSSELL SAGE FOUNDATION 
 
 No. 5. Cooperative Credit. A Selected Bibliography. Bulle- 
 tin of Russell Sage Foundation Library, June, 
 1914. (5 cents.) 
 
 RL 15. A Credit Union Primer. By Arthur H. Ham and 
 Leonard G. Robinson. 
 
 Contains a brief history of cooperative credit, a 
 definition of its field in the United States, an out- 
 line of the elementary principles of credit unionism, 
 together with model by-laws, necessary books and 
 forms, instructions for organizing, and the New 
 York credit union law. 
 
 Division of Remedial Loans. 79 p. 1914. (25 cents.) 
 
 RL 16. The Cooperative People's Bank. By Alphonse Des- 
 jardins. 
 
 The evolution of the cooperative bank, the Canadian 
 
 system, its growth and accomplishments. 
 Division of Remedial Loans. 42 p. 1914. (15 cents.) 
 
CREDIT UNIONS AND THEIR RELATION TO 
 SAVINGS AND LOAN ASSOCIATIONS 
 
 The credit union though a new institution in this state 
 is by no means an experiment. It is merely an adaptation of 
 the cooperative machinery for encouraging thrift and sup- 
 plying short-term personal credit that has been in successful 
 operation abroad for 65 years. Starting in Germany in 1850 
 it has spread to practically every European country and even 
 to India, Egypt and Japan, taking on new names and some- 
 times new characteristics to suit the conditions existing in 
 each country, but always preserving the essential elements 
 which have made it successful and caused it to be termed by 
 students "the most wonderful thing in Europe." 
 
 The number of credit unions in existence in all parts of 
 the world has been estimated to be over 65,000 with a mem- 
 bership of 15,000,000 and an annual business amounting to 
 $7,000,000,000. Russia which in 1904 had 378 unions now 
 has 14,000. On Jan. 1, 1914, there were 18,000 unions in 
 Germany making loans to members in one year of over a 
 billion and a half dollars. In 1909 Japan alone had 2,000 
 unions, and the little country of Roumania where the move- 
 ment started in 1902 had 2,500 unions with a membership 
 of 350,000 or 35% of the entire population of the country. 
 
 Despite the depredations of loan sharks in our cities and 
 the apparent hardships encountered by farmers in some sec- 
 tions of the United States in obtaining short-term credit at 
 reasonable rates — conditions which led to the origin and 
 growth of the movement abroad — there was in that year 
 (1909) not a single credit union, rural or urban, in the United 
 States, in fact there is no more striking phenomenon in the 
 history of modern credit than the remarkable spread and re- 
 sults of cooperative personal credit in Europe during the past 
 two decades on the one hand and its failure on the other hand 
 to develop in this country. This is particularly noteworthy 
 when we consider the wonderful development of the building 
 and loan idea in this country, for the building and loan associa- 
 tion (or the savings and loan association as it is termed in 
 
New York) is to the credit union what the various types of 
 associations abroad for extending long-term mortgage credit 
 are to the Schulze-Delitzsch society of Germany, the People's 
 Bank of Italy and the other variations of the cooperative 
 personal credit association found abroad. One might have 
 expected, as the two institutions have developed simultane- 
 ously abroad to meet the two classes of demands, that some- 
 thing similar to the credit union would have arisen here to 
 keep pace with the building and loan association. Surely it 
 was not through lack of demand for increased personal credit 
 facilities that the credit union failed to develop nor was it 
 due to the existence of other machinery capable of filling the 
 need. In his palmiest days the usurer of Europe scarcely 
 reached the pinnacle of extortion which for many years he 
 occupied in this country and even now occupies in no small 
 number of communities. As a matter of fact the worst type 
 of usurer, the salary loan shark, is practically an American 
 institution. 
 
 While witnessing the development of credit unionism 
 abroad we have been largely content in the past to enact re- 
 strictive legislation which made the plight of the borrower 
 worse than before. A long chapter of wasted efforts has 
 taught us that legislation affecting small loans must be of a 
 constructive character if it is to accomplish results and that 
 along with legislation must go competition of the sort that will 
 force the usurer to discontinue his evil practices and adopt 
 better standards. This belief has lead to the development 
 in recent years of the remedial loan society which aims to 
 supply the demand for small loans secured by mortgage or 
 pledge of personal property at reasonable interest rates and 
 under terms which borrowers can meet. 
 
 The growth of the remedial loan societies has been con- 
 siderable, especially during the last six or seven years, and 
 they have accomplished a measurable improvement in the 
 small loan situation, but their field is necessarily restricted. 
 Their most ardent adherents realize that they cannot satisfy 
 more than a part of the great demand for short term loans 
 and that on account of their impersonal character they cannot 
 effectively encourage borrowers to become thrifty and pro- 
 vide in advance for such emergencies as those which led to 
 
their distress. This is the nub of the whole proposition: 
 the need for (1) an agency from which the deserving man, 
 without property, may borrow small amounts for a legitimate 
 purpose at a reasonable interest rate and under easy terms 
 of repayment on security of his character, industry, sobriety 
 and thrift, and (2) an agency which will appeal to the thrift 
 instinct in a much more personal and effective way than is 
 done by existing agencies, for the lack of thrift is at the 
 bottom of this great loan shark evil which has caused so much 
 despair and wrought so much ruin in American homes. 
 / What is thrift? It is not merely saving for the sake of 
 saving ; it is economy, self-reliance, self-denial to attain a given 
 object which may be anything from the ownership of a home 
 to the accumulation of funds to buy the winter's coal supply. 
 It is the spirit that prompts a man, realizing that he has a 
 limited term of usefulness, to set aside with regularity, over 
 and above the cost of proper upkeep, such amounts as will 
 provide for things like accident, illness, unemployment, old 
 age and death. It is exactly the same principle that the com- 
 petent manufacturer employs when out of his profits he 
 makes necessary provision for insurance and depreciation. 
 We all realize the importance of making provision for the 
 future but too many of us expect such provision to come from 
 increased earnings in the future rather than from savings in 
 the present. And as our condition improves, our expenses in- 
 crease. As our income grows, new wants appear and saving 
 is again put off. 
 
 Saving is difficult for the average man no matter how 
 good his intentions may be. He may fully appreciate the ad- 
 vantages of habits of thrift but to make him thrifty he requires 
 something more than an agency that will receive and safeguard 
 his deposits : he requires an agency which will make its hours 
 of business conform to his convenience, which is conveniently 
 located, which does not require him to stand in line for an 
 hour awaiting his turn; he requires an agency which will 
 constantly remind him of his resolution to save and to which 
 he is not ashamed to bring a dollar, fifty cents or even a dime. 
 
 The potentialities of the credit union in these directions 
 are now beginning to be appreciated. Following the imme- 
 diate example of the province of Quebec and the advice of 
 
 5 
 
M. Desjardins, a French-Canadian journalist who has given 
 years of his Hfe to the founding of a system of People's Banks 
 in Canada, the State of Massachusetts enacted a law in 1909 
 which has resulted in the formation of over 50 unions there 
 with a membership of 6,000 and a share capital of $180,000. 
 Nfew York, Texas, Wisconsin, North Carolina, Kansas and 
 some other states have now followed Massachusetts' lead and 
 given the idea legal sanction. In New York 17 credit unions 
 have been organized. Eight of these were formed by Jewish 
 farmers, the others by employes of such establishments as 
 Bing Sc Bing, Marx & RawoUe, The Postal Telegraph Com- 
 pany and the American Can Company. 
 
 A credit union is an association of persons joined together 
 in a cooperative endeavor: 
 
 1. To encourage thrift by providing a safe, convenient 
 and attractive medium for the investment of the savings of 
 its members; 
 
 2. To promote industry and eliminate usury and extor- 
 tion by enabling its members to borrow for productive and 
 other beneficial purposes at a reasonable cost; 
 
 3. To train its members in business methods and self- 
 government and educate them to a full realization of the 
 value of cooperation. 
 
 Under the New York law seven or more persons may 
 combine in any community of the state, rural or urban, to 
 form a credit union under the supervision of the State Bank- 
 ing Department. Within certain limits the law permits con- 
 siderable variation in the form which credit unions may take. 
 It requires that the by-laws, which must first be approved 
 by the Superintendent of Banks, shall state the scope of the 
 organization ; the qualifications for membership ; the conditions 
 upon which shares may be issued, paid for, transferred and 
 withdrawn; the conditions upon which deposits may be re- 
 ceived and withdrawn; the manner in which the funds shall 
 be employed, the guaranty fund accumulated, dividends de- 
 termined and paid and fines and fees of any character charged. 
 It prescribes a maximum rate of interest upon loans of one 
 per cent, per month ; limits the borrowing power to forty per 
 cent, of the capital except where the capital is $5,000 or less. 
 
in which event a credit union may borrow up to $2,000; re- 
 quires security to be taken for loans made to members in 
 excess of $50, but permits endorsed notes to be considered 
 security for such loans, and limits investments to securities 
 legal for savings banks. 
 
 Membership is based upon some common bond or com- 
 munity of interest. Common occupation or employment, 
 membership in the same church, club, fraternal or labor 
 organization and neighborhood association are recommended 
 as bases of membership. In rural communities the church, 
 parish, school district and the local grange furnish a satis- 
 factory foundation for membership. The scope of the union 
 must be so limited as to permit of mutual acquaintanceship 
 and membership must also be based upon good moral char- 
 acter, honesty, sobriety and industry. 
 
 A credit union is an association of members and not of 
 capital. For that reason each member has but one vote re- 
 gardless of the number of shares that he may hold. Control 
 is vested in a board of directors, a credit committee and a 
 supervisory committee, all elected by the members at a general 
 meeting. The directors have the general management of the 
 affairs of the credit union. It is their duty to act upon appli- 
 cations for membership, determine the rate of interest on loans 
 and deposits, declare dividends and recommend amendments 
 to by-laws. The officers usually serve without pay. Some- 
 times the treasurer receives nominal compensation in return 
 for acting as manager or executive clerk of the union. The 
 credit committee has charge of loans made to members, de- 
 termines the security upon which each loan shall be made 
 and fixes the terms of its repayment. The supervisory com- 
 mittee audits the books and accounts and supervises the acts 
 of the directors, officers and credit committee. 
 
 The funds of the credit union consist of share-capital, 
 members' deposits and borrowed money. Shares are usually 
 issued in denominations of $5 payable in one sum or in in- 
 stalments. Each member is required to purchase at least one 
 share before he may become a depositor or borrower. Divi- 
 dends are paid only upon paid-up shares but, regardless of 
 the number of shares for which a member may have subscribed, 
 he is credited with a paid-up share as soon as his instalment 
 
 7 
 
payments amount to the par value of a single share. It is 
 customary to permit withdrawals in the order of their filing, 
 reserving the right, however, to demand the usual thirty 
 days' notice in writing. 
 
 Payments upon shares are generally looked upon as sav- 
 ings for distant expenditures, while deposits are savings for 
 more imminent needs. It is customary to accept even trifling 
 sums of money on deposit or as instalments upon shares in 
 order to encourage saving among the humblest members. 
 Interest is allowed on deposits at or slightly above the sav- 
 ings bank rate. 
 
 Loans are made to members alone and solely for purposes 
 which promise to result in a saving, a profit or other benefit 
 to the borrower. The character of the member is largely the 
 security for the loan. Not only is his character considered 
 by the board of directors when acting upon his application 
 for membership, but it is again appraised by the credit com- 
 mittee when he becomes an applicant for a loan. 
 
 Character is a recognized form of security. Most persons 
 are entitled to some credit upon the basis of their character, 
 but the ability to appraise this form of security involves a 
 more or less intimate knowledge of personal habits and of 
 financial and domestic situation. Credit unions are formed 
 on the principle that a man's best asset is his own associates' 
 estimate of him. As they are composed of a small homoge- 
 neous membership, mutually acquainted, and admit to mem- 
 bership only those known to be honest and industrious, and 
 make loans to such of their members thus carefully selected 
 as have a legitimate need for the money, their loans are 
 comparatively safe. In addition to these safeguards, the loan 
 if of considerable size is further secured by good endorse- 
 ments and in some cases even by the pledge or mortgage 
 of personal property or such other security as the appHcant 
 may be able to provide. 
 
 The credit union eliminates the high cost of investigation 
 to which commercial agencies operating in a similar field are 
 committed, and the security supplied is sufficient to attract 
 savings deposits from members and to permit a certain amount 
 of borrowing when necessary on favorable terms from out- 
 side sources of capital. It makes loans to its members at a 
 
 8 
 
rate of interest which the commercial lending agency could 
 never approach. Although the New York law allows an 
 interest rate of twelve per cent, per annum, credit unions in- 
 variably loan at a much lower rate. 
 
 The credit union serves the individual. It understands 
 him better than anybody else and makes a link between his 
 need for credit and those who have money to lend, thus 
 through cooperation bringing credit facilities within the 
 reach of those who individually could not obtain them. It 
 has been said that the credit union movement is teaching us 
 that ten times nothing is something, and that a hundred times 
 nothing may be $10,000, for if a hundred men without bank- 
 ing credit unite in a credit union, they may soon have as a 
 body considerable borrowing power. Capacity for united 
 action and ability to join in sympathetic association are the 
 solution of the difficulties of those who labor under credit 
 handicaps. 
 
 Membership in a credit union carries with it liability for 
 the debts of the union. Each credit union may fix the liability 
 of its members in proportion to their share-holdings, even 
 prescribing unlimited liability if it sees fit. 
 
 Membership also carries with it responsibility. A mem- 
 ber must feel the necessity for the organization, that he is a 
 part of it, that it is developed and managed to promote and 
 protect his interests — a real financial democracy of mutual 
 assistance and mutual confidence in which each member is 
 forced to make of his own efforts, of his own character, of 
 his own habits, security worth lending upon. 
 
 A question which is naturally asked is, "Are deposits safe 
 in these institutions?" Let me quote briefly from the 
 testimony of one member* of the American Commission which 
 examined the European associations: "The first banks we 
 visited I asked again and again: 'Suppose I have $5,000 to 
 deposit, what security have I?' And the answer was, 'The 
 bank, the society.' 'Yes, I know; but your bank has $400 
 capital and $300 surplus; now what security is that for my 
 $5,000?' and the answer was still, 'The bank, the society.' 
 And it dawned on me that I had missed the fundamental prin- 
 ciple of the system ; that I was looking through eyes adjusted 
 
 *Hon. Ralph Metcalf, Washington. 
 
 9 
 
to our commercial banking; that the $700 or $800 of capital 
 and surplus really cut little figure in the equation ; that this is 
 the security — the principle that Raiffeisen declared and has 
 so thoroughly demonstrated — the character, moral worth, 
 sobriety, industry, thrift of the 50 or 100 men united in co- 
 operation; that the banks are safe because, as Luzzatti said, 
 they have made the improvident thrifty, the drunkard sober, 
 the lazy industrious; that their loans are going to be repaid 
 because they build character as well as bring comfort, because 
 the use of the money borrowed is in each case its own security, 
 and nowhere in any system is the debtor so closely and con- 
 stantly watched and kept to the line. Practically all of the 
 money of the village is deposited in the little bank with full 
 confidence. Are they safe? European authorities tell you 
 without hesitation that they cannot fail." 
 
 There is no business undertaking, cooperative or other- 
 wise, that is entirely free from the liability of loss. What few 
 failures have occurred among credit unions have been due 
 to carelessness and neglect of the basic principles. The 
 official reports show that in the 16 years from 1895 to 1910 
 there were but 19 failures out of a total of 15,000 cooperative 
 credit societies in Germany, and in no single case did a de- 
 positor lose a cent. For each one of these 19 failures there 
 were 55 failures among commercial banks. Out of the capital- 
 ized character of groups of honest and industrious persons a 
 security has come which has proved to be sound in spite of 
 the weakness of the individual units. It may be said that it 
 does not necessarily follow that the plan will work in the 
 United States, but why should it not work here? The credit 
 union is the simplest form of cooperation, and one of its 
 strongest features is its remarkable adaptability. "It has 
 shaped itself to varying national characteristics and to every 
 variety of man, business or calling." Can it be that we 
 are unfitted to take advantage of this idea? The tre- 
 mendous growth of the building and loan associations, of 
 mutual and cooperative banking and insurance, and the suc- 
 cess of cooperative ventures in production and distribution 
 seem to answer this question decisively in the negative. 
 Although we have been slow to grasp the idea we apparently 
 now have the beginnings of a healthy movement tending in 
 
 10 
 
the direction of the widespread organization of these bene- 
 ficent agencies of thrift and mutual helpfulness. 
 
 Credit unions do not become competitors of the savings 
 and loan associations. Though both seek to encourage thrift, 
 they operate in different fields. Credit unions are designed 
 for small communities or groups in neighborhoods, employ- 
 ments or fraternal, religious or trade associations where the 
 members are personally known to each other. The savings 
 and loan association seeks primarily to encourage home build- 
 ing ; the credit union opens up a new field of thrift. Operating 
 usually in a humbler sphere it encourages savings in small 
 sums on the part of people who perhaps have never saved 
 before, but who through the agency of the credit union may 
 be transferred into thrifty citizens aspiring eventually to own 
 their own homes. 
 
 ^ While the credit union resembles the saving and loan 
 association in outline, they differ in numerous important 
 details. Credit union shares are not issued in series but may 
 be purchased at any time, instalment payments beginning 
 from the date of subscription and being fixed in size and 
 frequency to suit each member. Payments as small even as 
 five cents a week are accepted and the share which usually 
 has a par value of $5 matures according to the individual 
 contract. Dividends may be credited to the share or with- 
 drawn at the member's pleasure. 
 
 As voting power goes with membership and not with the 
 number of shares owned, there is no real necessity for fixing 
 a maximum number of shares which each member may hold. 
 There is no loss of dividends in the case of withdrawal. 
 Irregular savings are received not as payments on savings 
 shares but as deposits upon which a fixed rate of interest is 
 paid. Twenty-five per cent, of the net earnings is set aside 
 annually to the guaranty fund until it equals the capital. 
 
 In the matter of loans there are still more striking dif- 
 ferences between the two institutions. The credit union 
 grants short-term personal credit; the savings and loan asso- 
 ciation gives long-term credit usually upon mortgage security 
 or, if not, on security of pledge of share value, the character 
 of its members being of secondary importance. The credit 
 union however banks upon character. As any member may 
 
 11 
 
become an applicant for a loan its membership is on a more 
 personal basis. 
 
 The credit union considers the object of the loan to be 
 of prime importance and many loans otherwise well secured 
 are decHned because the object is disapproved. This dis- 
 couragement of unnecessary borrowing is one of the credit 
 union's important functions. 
 
 Where the credit union has developed, it has offered the 
 readiest escape from the clutch of the usurer ; has transformed 
 borrowers into savers; has given practice in careful business 
 administration and the prompt payment of obligations; has 
 taught self-government on a democratic basis and developed 
 a community spirit. M. Desjardins says: "It transforms 
 moral qualities into valuable assets and brings to the indus- 
 trious and thrifty man a higher reward than mere wages — 
 the confidence of his fellow citizens." 
 
 The savings and loan associations in providing oppor- 
 tunity for home building are performing a function of prime 
 importance. The benefit derived from them is not to be 
 measured by the figures representing their growth and success, 
 surprising as they are. To countless men the assistance of the 
 savings and loan association has marked the beginning of days 
 of happiness, prosperity and real advancement in life. 
 Cannot you as representatives of these beneficent institutions 
 aid in the growth of this newer form of mutual assistance 
 represented by the credit union, to the end that some of the 
 thousands now toiling to pay ruinous interest rates to heart- 
 less loan sharks may obtain that urgent short-term personal 
 credit which means so much to the man in need; that some 
 of those in humble circumstances whom your associations 
 have not yet reached may learn the practical lesson of thrift 
 from small beginnings in order that they too may eventually 
 get into the class of self-respecting, independent, home-owning 
 people? 
 
 12 
 
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