Celebrating Our Founders Celebrating Our Founders

The Wisconsin Idea in Consumer Finance

"Are not the power of credit and monopoly practically one?" asked Charles McCarthy in his 1912 book The Wisconsin Idea. His question called attention to the persistent problem everyday people faced in accessing credit on terms that would enable them to improve their economic circumstances. His conclusions called for a commission to study the cooperative credit systems of Germany and Italy as an alternative to business-focused commercial banks and illegitimate predatory wage lenders. The study moved quickly to legislative action and the first "Cooperative Credit Associations" Statute in Wisconsin was passed in 1913. However, no credit unions were organized until 1923 when the Legislature revised the Statute and made it more effective. 

In response to the predatory wage lending practices prevalent at the time, which often carried interest rates between 200% and 1000%, and the fact that the usury laws in place were thought too restrictive to make it possible for legitimate consumer finance companies to operate profitably, the Legislature passed the 1927 Uniform Small Loan Bill. The bill, which permitted the charging of interest at 3.5% per month, was controversial and faced the threat of repeal almost immediately after passage. Professor John R. Commons argued against the outright repeal, since he maintained that 85% of people in Wisconsin did not qualify for bank credit, and that over time competition and public policy would work to lower the 3.5% monthly rate. In the 1931 Legislative Session, a bill drafted by Commons and introduced by Assemblyman Harold Groves would have provided more regulatory oversight of consumer finance. The Groves bill was not passed, however, the Wisconsin Association of Personal Finance Companies voluntarily pledged to put into practice many of the provisions of the bill. 

The 1931 Wisconsin Legislative Session passed the "Groves Credit Union" bill, a key improvement of consumer credit conditions with a funded mandate of the State Banking Department to hire a state credit union organizer. This state resource proved effective, and by the end of 1939, 563 credit unions were operating in Wisconsin, placing the state first among all states in the number of credit union per capita. Ninety years later, the impact of these events are evident to all the borders of Wisconsin and are important to the economic well-being of many of the state's residents. Today some 2.2 million Wisconsin consumers are members of locally owned, not-for-profit, cooperative credit unions.

The Founding of UW Credit Union

In 1931, Professor John R. Commons and many of his colleagues were investigating policy solutions to address the needs of Wisconsin residents for consumer credit. University of Wisconsin President Glenn Frank maintained a continuing friendship with Edward Filene who is considered the father of the U.S. credit union movement. Frank had been an employee of the William Filene's Sons Company in Boston earlier in his career and had worked closely with Edward Filene. Frank either on his own, or prompted by his faculty, telephoned Filene in March 1931, to request informative materials about credit unions to be sent "at once." On April 1, 1931, when the materials didn't arrive, Frank sent a Western Union Telegram to Filene reminding him of the urgent need for the materials. As a result, Filene dispatched a telegram to an associate that same day which said, "Please get in touch with President Glenn Frank immediately by telephone and supply him with information and materials regarding credit union situation in Wisconsin Legislature." 

With both the University of Wisconsin President, as well as a number of its most notable economics professors interested in the potential for credit union organizations to improve the financial situation for Wisconsin consumers, it didn't take long for a number of Commons' academic colleagues to see the benefits that a credit union organization might bring to their community. With the encouragement of their colleagues, seven members of the University community organized themselves to form a University-based credit union. These seven signed a charter application on June 1, 1931, to establish the University of Wisconsin Faculty Credit Union. After review and approval by the Commissioner of Banking, the charter was issued and the credit union began operations on September 29, 1931. 

Over the past 90 years, UW Credit Union has welcomed thousands of members to the credit union, has extended service to the entire community of the University of Wisconsin System, and today serves anyone from the immediate community that has a need for its services. While years ago the organization's moniker was simplified to UW Credit Union, the credit union operates as the same non-stock corporation, conducting business under the original cooperative credit union charter issued in 1931.