OTTAWA, Canada–Credit union leaders across Canada are dismayed, baffled and angry over a regulator’s decision that will ban them from using the words “bank,” “banker,” and “banking” in any way.
Not only does the prohibition mean an enormous undertaking and expense related to replacing the words in all of their messaging—one CU estimates it currently uses the words more than 2,000 times in various ways–there is also the question over what words to use in their place.
People don’t naturally say they’re doing their “credit union-ing,” noted one CEO at a Canadian CU.
As CUToday.info reported here, Canada's Office of the Superintendent of Financial Institutions has issued an advisory that restricts the use of those the words “bank,” “banker,” or “banking” by non-bank financial service providers. In other words, the country’s credit unions can no longer say that members may “bank” at the CU or use mobile “banking.”
A Strict Interpretation & A Theory
The ruling is a strict interpretation of the country’s Bank Act, and means the federal regulator could bring federal charges against any credit union that uses bank, banker or banking in any way. Credit unions in Canada are provincially regulated.
One theory for the reason behind the ban is that fintechs have increasingly used the words “bank” and “banking” in their messages, even though most are not regulated. Some other unregulated companies have also done the same. All are also subject to the prohibition.
The Canadian Credit Union Association has been sharply critical of the announcement, and credit union leaders across the country have responded with both anger and befuddlement at the decision, arguing that no one or institution can own any of the words.
Martha Durdin, CCUA
“Ottawa is telling credit unions to stop using the words Canadians use to describe the work we do,” said Martha Durdin, CCUA’s president and CEO. “This rule will prevent credit unions from advertising their ‘business banking’ services or even having an ‘on-line banking’ button on a website. Having to create and popularize new words is an unnecessary and expensive undertaking, and will make it difficult for credit unions to compete fairly with banks.”
Durdin said the CCUA is estimating the total cost to Canada’s credit unions would be about $80 million to make the change.
The OSFI directive is currently set to take effect in stages, with companies required to remove banking references from websites by the end of 2017 and from printed materials by June 30 of 2018.
'It's a Verb'
In Virden, Manitoba, Sunrise Credit Union president/CEO Tim Klassen said that should his credit union have to edit its website for instance, it will mean finding ways to replace the more than 2,000 mentions of the word "bank," as well as replace various promotional items that also use the words.
"Banking, to us, is a verb," she told local media. "Telling us we can’t use a verb is going to make it very different for us to do business … We’ve always used a traditional banking model."
Wood even suggested that membership might soon be "credit union-ing" rather than "banking."
"It’s going to be confusing for members," she said, adding that Westoba Credit Union plans to assist in the national association’s fight against the ban on the word "bank."
Meanwhile, in London, Ontario, Libro Credit Union’s Stephen Bolton told LFPress.com that the ban on the three words will cost his credit union an estimated “half a million dollars” to comply with.
Bolton told LFPress.com that Libro uses banking in a generic way and that the credit union has never pretended to be a bank.
“We offer banking services but we do it differently and have no interest in being a bank,” Bolton was quoted as saying. No one who has ever done business with us has thought they were using a bank and not a credit union.”
What Words to Use Instead?
But Libro Credit Union, like Canada’s other CUs, has encountered a challenge beyond just costs: what other words can be used in place of bank, banker or banking?
“Banking is a verb and I’m not sure what other word we can use successfully,” Bolton told LFPress.com adding, “After all of these years why now? We have gone over 100 years with credit unions using banking as a verb.”
In Kitchener, Ontario, Kindred Credit Union CEO Brent Zorgdrager appeared on the CBC's The Morning Edition and said he and others in Canada’s credit union community are baffled over what has led to the decision to ban the terms.
"As a regulated institution, we've been using the words "bank", "banking" and "banker" as verbs for more than 100 years in an uninterrupted way," Zorgdrager said during the interview. "We asked ourselves 'what's changed?'"
Kindred CU uses "Banking with Purpose" as its tagline, which can be seen in a new commercial here.
Zorgdrager said consumers don’t join credit unions because they have been tricked into thinking they are banks. Instead, it’s just the opposite.
"Anyone who joins a credit union does it deliberately; they don't kind of fall into a local financial institution,” he said.
'Do My Credit Union-ing?'
In a separate interview with TheRecord.com, Zorgdrager added, "We like to keep the difference between a bank and how it's regulated, but we want to continue to use terms that people understand. This is how Canadians describe the business they're undertaking with institutions like ourselves. People won't say 'I'm going to do my credit unioning.'"
Kate Neff, vice-president, marketing services and corporate communication for Kitchener-based Your Neighbourhood Credit Union, told TheRecord.com, “’To bank,' 'banking' — those are common words," she said. "The idea that the big banks can own a verb is ridiculous.”
Neff’s sentiment was echoed by a member of Parliament, Wayne Stetski, who represents Kootenay-Columbia.
'This is Ridiculous'
“Frankly, this is ridiculous,” Stetski told e-KNOW.ca. “It is outrageous. Our credit unions are highly regulated and respectable institutions that shouldn’t be blocked from using the everyday words that best describe their services.”
Stetski further told e-KNOW.ca that the OSFI’s pronouncement is based on an 80-year-old law that has never previously been enforced with credit unions.
“Parliament’s intent in this section of the Banking Act is to avoid obvious examples of entities deceiving the public. It wasn’t meant to police the common verbs used by accredited institutions,” he said. “…Credit unions give a significant amount of their profit back to their community every year. This unconscionable ruling will cost Canada’s credit unions $80 million, meaning they’ll have less to give back.”
Steinbach Credit Union
Steinbach Credit Union CEO Glenn Friesen said in a statement on SteinbarchOnline.com that the regulator’s decision was very disappointing and ridiculous, and that it lacks common sense. He said the three words are common verbs people use to describe the services provided by financial institutions, including credit unions.
"Steinbach Credit Union has been around for 75 years and it's a common verb used, banking, I do my banking at the Steinbach Credit Union," said Friesen. "We do the same things as banks do. We take deposits, we do check clearing, we do payments, we do loans, and wealth management. Everyone calls that banking. Give me another word that says the same thing."