Overview of Federal Credit Unions

A federal credit union is a member-owned and controlled, not-for-profit, cooperative financial institution formed to provide its members with affordable and safe financial services.

The Federal Credit Union Act (the Act), as amended, describes the basic structure governing federal credit unions.¹ Generally, credit unions have the following key characteristics:

• Membership is limited to a group, or multiple groups, each defined in the credit union’s charter, each of which has a common bond of occupation or association or is located within a well-defined local community, neighborhood, or rural district.
• Member deposits into the credit union, otherwise known as shares, allow the members to become owners of the credit union with a right to run for election to become a credit union official, as well as vote for the credit union’s officials and certain other credit union matters.
• Members exercise democratic control: one member, one vote, regardless of shares owned.
• Shares provide primary funding for the lending and investment activities of the credit union.
• The credit union is governed by a board of directors elected by and from the credit union’s membership. Board and other committee members serve on a volunteer basis and are charged with acting in the best interests of all members. Professional managers and staff may be compensated, but only one member of the board may be compensated as a board officer.