Terms of use
Credit unions upset they can’t say ‘banking’
WATERLOO REGION — Credit union executives are hoping that common sense prevails in a spat that’s pitted them against a federal regulator over the use of terms like “bank” and “banking.”
The Office of the Superintendent of Financial Institutions (OSFI) recently ruled that those terms, along with “banker,” can’t be used by “non-bank financial service providers,” including unregulated entities, federally regulated trust and loan companies, and provincially regulated institutions such as credit unions.
OSFI says it issued the decree — its interpretation of Bank Act restrictions on those words — to provide clarity, in light of what it says is increased use of these terms by non-banks.
Representatives of credit unions, which are memberowned co-operatives, say they’re all for clarity, and for shining a light on financial service providers that mislead or confuse customers by calling themselves banks when they’re not.
“We spend a lot of effort to differentiate ourselves,” said Brent Zorgdrager, CEO at Kitchener-based Kindred Credit Union, which has eight branches in southwestern Ontario.
But he’s scratching his head as to why Kindred can’t describe the typical banking services it provides, such as taking deposits and issuing loans, as banking.
“This is how Canadians describe the business they’re undertaking with institutions like ourselves,” he said. “People won’t say ‘I’m going to do my credit unioning.’”
Zorgdrager has a few words of his own to describe OSFI’s move — unnecessary, unfair, problematic.
It’s a sentiment echoed by Kate Neff, vice-president, marketing services and corporate communication for Kitchenerbased Your Neighbourhood Credit Union.
“‘To bank,’ ‘banking’ — those are common words,” she said. “The idea that the big banks can own a verb is ridiculous.”
Your Neighbourhood Credit Union has 20 branches and about 57,000 members.
Credit unions are alternatives to the big banks, and that’s how they advertise themselves to potential customers in a competitive marketplace, Neff said. “How are we supposed to do that if we can’t tell people what we do in words people use every day?”
OSFI has given credit unions and others until the end of the year to change terminology on websites, and until June 30, 2018, to change printed materials. They have another year after that to change physical signage. The Canadian Credit Union Association has estimated that it would cost about $80 million in total to comply.
“That’s money we’d normally be investing in our communities” or distributing to members, Neff said.
For Kindred — which changed its name from Mennonite Savings and Credit Union last year and sports a “Banking with Purpose” motto — funding its changes would be equivalent to stopping support for community initiatives and causes for two years, Zorgdrager said. “It would kind of break my heart, as well as theirs.”
The association believes members who continue to use these terms could be charged criminally, and has called on the federal government to reverse OSFI’s ruling.
“We do hope that reason will prevail,” Neff said. “You have to have faith that there’s going to be a common-sense solution.”