Vermont Credit Union Fighting for Freedom of Speech in ‘Bank, Banker, Banking’ Issue

By David Bennett, Director of Public Relations, Northwest Credit Union Association

It’s well established that for nearly 100 years credit unions have provided banking services to their members—ordinary people who bank on credit unions to be safe, sound and secure. This is a fact. But unlike banks, credit unions provide all those modern services in a not-for-profit, cooperative manner that is consumer-friendly and non-adversarial.

Credit unions think differently than banks. They always have.

Would you believe, however, that credit unions across the nation are bound by regulation to avoid using the word “bank” to describe their products and services or risk a regulatory slap-down—or even a lawsuit? It’s true. And the latest chapter in this saga is happening right now in Vermont.

Two months ago, Vermont State Employees Credit Union (VSECU) was slapped with a formal “notice of intent” by the Vermont Department of Financial Regulation (VDFR) following a complaint by the Vermont Bankers Association that it would issue a cease-and-desist order prohibiting the credit union from using the words “bank” and “banking” in its marketing, communications and advertising.

The warning is fairly common, and a similar notice was sent to at least one Washington credit union in 2009 during the height of the financial crisis when credit unions were employing aggressive marketing tactics to inform consumers that there was a better banking choice. The credit union complied and nothing more was said of it. But the issue still remains, as was made apparent by the stern actions of the VDFR.

Credit unions contend that when used as verb, the terms bank and banking present no compliance issue for the cooperative institutions. In Washington and Oregon, in fact, credit unions regularly use the terms to describe what they do and have generally had few issues with regulators or banks. Industry-wide, however, the “bank, banker, banking” language remains an unresolved, sub-surface issue that, through VSECU’s appeal of the VDFR ruling, may soon come to resolution.

The first hearing is scheduled for tomorrow.

Apparently, the offense bankers take from credit unions referring to their services as “banking” is equal to the offense credit unionists take from being referred to as bankers. It’s understandable. Most credit unionists cringe when they are called bankers, perhaps even more than when consumers refer to their institutions as banks. This is because there is a big difference in how these institutions provide essentially identical services.

But using bank-related terms to describe credit unions is not illegal or antithetical to regulatory requirements. And the First Amendment Constitution of the United States of America gives great deference to the manner in which words are used. This is the stance VSECU has taken with its appeal which, if successful, will create parity among Vermont’s financial institutions that will likely spread to every other state in the union.

Limiting free speech is a slippery slope. Even the VDFR uses the term banking to describe the services provided by both banks and credit unions. And both types of institutions are regulated by the “Banking Division.”

This implied approval of the term’s use by VDFR to describe credit union services doesn’t sit well with banks—a trivial stance based on the not-for-profit, exempt-from-certain-taxes status of credit unions that forces banks to competitively price their products and services.

It’s unknown at this point how the ruling will fall on the war of words being waged in Vermont. But a report today by the Credit Union Times seems to indicate that Vermont’s state regulator sees this as a losing issue.

Jim Rubenstein reported that Vermont’s top regulator, Commissioner Steve Kimball, has said he remains open to any kind of settlement or compromise regarding a proposed cease-and-desist order against VSECU, although he has no knowledge of how the pre-hearing might go. Kimball did acknowledge, however, that during informal discussions about the issue, his office has included all interested parties, including VSECU, the Vermont Bankers Association, and Occupy Burlington, which plans to send representatives to Wednesday’s hearing.

Regardless of how Wednesday’s initial “scheduling” hearing goes, the entire credit union community is rooting for a victory in Vermont—and waiting for their opportunity to finally have the freedom to describe what they do and how they do it without fear of reprisal.

 

Questions or Concerns? Contact Matt Halvorson, Anthem Editor: mhalvorson@nwcua.org.

Posted in Around the NW, Community Impact, NWCUA.