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Word Games

As the Office of the Superintendent of Financial Institutions put the kibosh on credit unions using the term "banking," throwing the system into an uproar, Martha Durdin, CEO of Canadian Credit Union Association, exercised diplomacy and the power of the people, compelling Ottawa to reconsider the edict.

It turns out that our mothers lied to us. When friends said things that hurt our feelings, most of us heard some version of the old nursery rhyme: Stick and stones may break my bones but words will never hurt me. 

Credit unions learned that’s not true. Words can hurt and cost you millions, if you’ve used the wrong words – or the right words – in the wrong way. Or someone suddenly decides that you have.

On June 30, the Friday before the Canada Day 150 long weekend,  the Office of the Superintendent of Financial Institutions (OSFI) issued an advisory about its intent to enforce long-ignored restrictions on the use of the terms bank, banker and banking.

The advisory has four pages of legalese. The short, plain-language version is that credit unions could no longer use those words at all to describe their business activities. The biggest challenge: a ban on the term banking, since most people think it’s a generic description of the activities they carry out at a credit union or bank.

The advisory from Carolyn Rogers, OSFI’s assistant superintendent, Regulation Sector, says only federally regulated organizations can use those words and set out deadlines for credit unions to change their current practices: Dec. 31, 2017 for websites, print materials by June 30, 2018 and physical signage by June 30, 2019.

To verb or not to verb

Restrictions on use of the word bank have been in place since 1880, with many amendments over the years. Credit unions don’t want to call themselves banks, or, heaven forbid, bankers, but argue that banking is a common verb to describe the activities they carry out.

To say the advisory was a disappointment to the Canadian Credit Union Association (CCUA), which had dedicated significant advocacy efforts towards ghting these restrictions, would be an understatement. Almost immediately, CCUA launched an unprecedented blitz as credit unions staff and leaders used social media and traditional media to get out the message that they didn’t support the new ruling.

“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.” – Brent Zorgdrager 

Brent Zorgdrager, CEO of Kitchener, Ont.’s Kindred Credit Union (21,000 members, $1 billion in assets), told CBC he did not oppose OSFI enforcing regulations against credit unions using the term as a noun and describing themselves as a bank. But Zorgdrager wants to continue to use the terms as verbs about what they do. He believes banning the words would create confusion. “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.”

Martha Durdin, CEO of the CCUA, says that in the past credit unions had often asked OSFI to review language use to make sure they were on side — the term “banking” was not an issue. “We sent them the ads we ran for our cooperative banking campaign and never heard back from them,” Durdin says.

George de la Rosa, CEO of Luminus Financial of Toronto (4,000 members, $140 million in assets) took a quick look at his website and found 523 pages with wording that would need to be changed. Like several other credit unions, Luminus also uses the word banking in its marketing tagline. “We’ve been using Clearly Better Banking for several years,” de la Rosa says. “It was our way to differentiate ourselves and say we are better and we’re different. We’ll have to come up with a new brand approach.”

Luminus is certainly not alone on this front: G&F Financial Group (30,000 members, $1.7 billion in assets) states it offers “Life beyond banking,” while Kindred’s motto is “Banking with purpose.”

In response, Luminus and its marketing company launched and a campaign to poke fun at OSFI’s rules and encourage people to suggest alternative language that credit unions could use.

Long-term discussions

CCUA’s government relations team had been discussing the issue with OSFI and the Minister of Finance’s staff for months before the advisory was issued. Once it came out, they stepped up a campaign to flood MPs with comments urging the government to change the rules. Dozens of MPs got onside, Durdin says, adding she had hoped to persuade Minister of Finance Bill Morneau to “clarify” the situation and permit credit unions to use the verb banking.

While some credit unions were quick off the mark to start changing their websites and deciding what new language to use, de la Rosa, who is chair of the Small Credit Union Council of Ontario, says he’s talked to some that decided to take a wait, see and hope approach.

Turns out, they didn’t have to wait or hope for long. On July 20, in a meeting with CCUA representatives, Morneau agreed to find a resolution that would work for both the government and credit unions. (At deadline the details still hadn’t been announced).

“We respect and acknowledge that OSFI indicated in its advisory that it is simply interpreting existing banking regulations.” – Bill Maurin

As Durdin explained in a call shortly after to credit unions: “We can be very proud of everyone who participated in this. This was incredible work in the three weeks since the advisory came out. As a system, we had good communication and clear alignment. I think it’s an example of what we can do when we work together.”

Silver lining playbook

Indeed, not only were credit unions successful in obtaining a 180-degree change in position on the government’s part, it was a tremendously cooperative advocacy effort which also had the effect of raising credit union visibility and differentiating themselves from banks.

Continuing down this route would fit with the findings of a national survey carried out by CCUA and its National Marketing and Advisory Committee. It recommends that credit unions call themselves credit unions and refer to their members as members, not customers or owners. The research suggests this approach is more likely to attract and retain new members.

In the mid-1980s, Manitoba credit unions ran a TV ad campaign around the idea that people should be credit unioning, instead of banking. The commercials, which have not aged well, are available for a look and a laugh on YouTube.

Don Tuline, a former CEO of Richmond Savings, a predecessor of Coast Capital Savings Credit Union (543,000 members, $15 billion in assets), says he ran into the banking language issue
in the mid-1980s when the big banks threatened to take Richmond Savings to court. The credit union countered with an ad campaign: “We are not a bank, we’re better.” Says Tuline: “We ran various
ads along similar lines. The ads were extremely successful and we tripled our size in five years.”

There have been occasional skirmishes in the United States over usage of the terms bank and banking but a different legal landscape has limited their effectiveness, says Michael Edwards, vice-president and general counsel of the World Council of Credit Unions.

About two-thirds of the 6,000 credit unions in the US are federal and fall under legislation that lets them use banking terminology, as federal credit union legislation does here in Canada. The American fights have been at the state level, since about 20 states do have laws restricting usage of the terms and community banks have periodically tried to push the issue. For example, in 2012 Vermont’s largest state-regulated credit union reached an agreement that let it use the verb banking — but not bank — a solution that would satisfy Canadian credit unions.

Both sides say the disagreement between OSFI and the credit union system stemmed from confusion and how to avoid it. OSFI says people are confused when credit unions offer banking services, while credit unions say people will be more confused if they can’t use that common verb. Zorgdrager of Kindred offers insight: “Anyone who joins a credit union does it deliberately. They don’t kind of fall into a local financial institution and it just happened to be a credit union and think they are dealing with a bank.”

The CCUA has estimated it could have cost credit unions up to $80 million to comply with OSFI’s orders. For example, Steve Bolton, CEO of Libro Credit Union (103,000 members, $3.4 billion in assets), says his organization faced a bill of about $500,000.

System pragmatism

“We respect and acknowledge that OSFI indicated in its advisory that it is simply interpreting existing banking regulations,” says Bill Maurin, CEO of Meridian Credit Union (300,000 members, $14 billion in assets). “However, for credit unions like Meridian, the primary issue is that this federal legislation does not recognize the reality that both banks and provincially licensed credit unions are in the business of ‘banking,’ ” Maurin says. “That’s why it’s imperative to us that we continue the long-standing practice of using this term when serving our members. The wording in the existing legislation needs to be modernized to reflect long-standing market practices by provincially regulated deposit taking institutions. Until that is done, credit unions need a working interpretation of the legislation that reflects the current day business reality of how people use the term ‘banking.’ ”

Sometimes, stick and stones don’t break our bones but rather makes us stronger. In this case, the wrangling over “banking” terminology worked to raise awareness of credit unions and boosted the visibility of the system. ◊