Credit unions cry foul over ban on use of ‘bank’ terms
Changes could result in costly overhaul for firms using them for years, group says
The federal government is cracking down on which financial services companies can use the words “bank” “banker” and “banking” to describe their business, a move that has drawn criticism from the country’s credit unions.
A national association for the co-operatives said Tuesday they will have to abandon long-standing and accepted language to describe their business, and undertake a costly overhaul to change logos, trademarks, marketing, and slogans.
In an ironic twist, the government’s new Canadian Infrastructure Bank, which is being created to fund projects to build and upgrade infrastructure such as roads, bridges, and ports, can continue to use “bank” in its name.
“The government is inconsistently applying the rules to its own advantage and to protect banks at the expense of creating a level playing field for credit unions,” Martha Durdin, chief executive of the Canadian Credit Union Association, said in an interview.
The sweeping restrictions on credit unions, which are largely provincially regulated, will extend from signs to such commonplace parts of the business as on “online banking ” buttons on websites, she said.
She added that the cost to create and popularize new descriptive words will make it more difficult to compete with the banks.
In a notice published late Friday, the Office of the Superintendent of Financial Institutions said the federal Bank Act already stipulates the select group of regulated financial institutions that can use the term “bank” and related descriptive words.
But the words have nonetheless proliferated in the business of nonbanks, including fintech startups that offer financial services online and through mobile devices such as smartphones.
“In particular, these terms have been used by non-bank businesses in logos, slogans, trademarks, trade names, web pages, apps, signage, and print,” OSFI spokesperson Sylviane Desparois said. “The rapid growth of the fintech industry has also seen an increase in the use of these terms.”
She said the Bank Act restrictions on the use of the bank-related terms apply to all non-bank financial service providers, including federally regulated trust and loan companies, provincially regulated institutions such as credit unions, and unregulated financial services providers.
These “non-banks” will have until June 30, 2019, to completely phase out use of the terms on their signage, with earlier deadlines for websites and printed materials kicking in at the end of this year and next June.
Despite the crackdown, Desparois said the Canadian Infrastructure Bank, which won’t do typical banking services such as taking deposits and making mortgage and small business loans, will not have to change its name because it is governed by a federal law that is separate from the Bank Act.
“In this case, the Infrastructure Bank is being created by an Act of Parliament, so the (Bank Act) restrictions do not apply,” Desparois said.
Durdin, head of the credit union association, said it is frustrating that the crackdown will apply to financial institutions that have been using the same language for years “without confusing consumers about who they are dealing with” and what they do.
Some credit unions have been operating in Canada for more than 100 years, she said, noting that the co-operatives primarily owned by the members are regulated entities whose deposits are insured.
She noted, credit unions have often come out on top in customer service surveys that pit them against the banks, with titles such as the CFIB Battle of the Banks and IPSOS Best Banking Awards.