Why credit unions will no longer be able offer 'banking' services
Credit unions ordered to stop using the terms bank, banker, banking to describe what they do
Credit unions across the country are gearing up for a battle of words against the federal government after they were ordered to stop using the terms "bank," "banker" and "banking" to describe what they do.
The Office of the Superintendent of Financial Institutions (OSFI) announced last Friday it would start applying the rules of the Bank Act to all non-bank financial service providers such as trust and loan companies, and unregulated financial service providers.
"What would be the word banking? You wouldn't say credit unioning," said Marie Mullally, president and CEO of Credit Union Atlantic.
"It's quite frankly ridiculous."
In a posting on OSFI's website, it said the reason for the restriction is that it has noticed an increase in the use of the words "bank," "banker" and "banking" by non-bank financial service providers.
CBC business correspondent Scott Peterson said people he has spoken to in the banking industry told him the government regulator was under heavy pressure from the Canadian Bankers Association to impose restrictions on the use of the word "bank" for credit unions.
"It is important that consumers know when they are dealing with a bank rather than another type of financial service provider," a federal finance official said an in an email to CBC News.
"Allowing non-banks to use banking-related words (e.g. bank, banker and banking) could mislead consumers into believing that they are dealing with a federally regulated bank that is subject to protections and obligations created by the federal banking framework."
The official also said there are "many alternatives to these words that non-banks can use to describe their business and/or activity."
A costly change
Mullally said the measure will cost credit unions in Atlantic Canada millions to change everything from their websites to location signage.
Credit Union Atlantic's slogan, which is on their new signs, is "The better way to bank."
Mullally said being able to use banking words is critical for competitive purposes.
"If the banking consumer doesn't know what we do, why would they consider us as a full-service banking institution to our competitors?" she said.
There are 5.6 million credit union members in Canada, over 15 per cent of the population, said Mullally.
Timeline for making changes
Credit unions have been ordered to remove the phrase in stages. Websites must be changed by the end of the year, print materials by June 30, 2018, and signage by the end of June 2019.
There are 201 credit union locations in Atlantic Canada, eight of which are Credit Union Atlantic branches.
"Having a handful of companies only having the authority to use words in the dictionary is simply not common sense," said Mullally.
A Dalhousie University business professor said there is no doubt this will be an expensive switch for credit unions and they should fight it. But they may be able to turn this into a positive situation. Ellen Crumley said this is a chance for credit unions to further distinguish themselves from for-profit banks.
"Credit unions can overcome this. These are long-term, stable organizations. They are not focused on the short term," she said.
"Ultimately, I don't think this is going to fundamentally undermine who they are as organizations, as co-operatives."
Crumley said credit unions have weathered times of instability by focusing on their community-first values.
She doesn't think a change in language and branding will drive away customers or prevent new ones from signing up.
Crumley said people will still refer to the credit unions as their banks.
Protecting 'the many members'
Mullally said she's been busy contacting provincial and federal politicians about the matter.
She said credit unions in Atlantic Canada have about 464,000 members.
"We're trying to protect, not only our organization, but the many members," said Mullally.