Canadians Banned From ‘Banking’ At Credit Unions

Credit unions in Canada are banned from using the B-word. This regulatory shocker is reverberating through the U.S. Everyone is wondering: Will American credit unions be next?

Generally speaking, Canadians are an even-tempered an affable people, particularly when compared to their American counterparts. But after a stunning decision by Canadian regulators, many credit union executives there are completely enraged. Their blood is boiling. Why?

Because the Canadian Office of the Superintendent of Financial Institutions (OSFI) has issued a directive that prevents any financial institution other than traditional, federally-regulated banks from using terms like “bank”, “banking”, “bank accounts” or “banking services”. Anywhere, any time, in any medium.

That means Canadian credit unions can’t describe their services as “cooperative banking.” They can’t call branches “banking centers.” They can’t use slogans like “Better Banking.” They will be prohibited from offering “mobile banking”, or advertising “automated banking machines”. Marketing messages can’t use phraseology like “for all your banking needs” or “come do your banking with us.” There will be no such thing as “business banking” or “private banking”. Credit unions can’t even have an “online banking” button on their website.

If you’re thinking there has to be some wiggle room in the OSFI decision, you’d be wrong. This is an unequivocal ban. The OSFI goes so far as to prohibit credit unions from advertising under the “banks” heading in Canadian directories. Arguably, a credit union representative wouldn’t even be allowed to ask a prospective member, “Where are you currently banking?”

Reality Check: Consumers are going to refer to basic financial services as “banking”, no matter what regulators or lawmakers say. In fact, many credit union members refer to their credit union as “the bank” (e.g., “I’m going to the bank”).

The OSFI gave credit unions until the end of the year to update information in digital channels. Print materials must be changed by June 30, 2018, and physical signage no later than June 30, 2019.

The OSFI new interpretation of Canada’s Bank Act, which prohibits non-banks from using language that might confuse the public, is so strict almost inconceivable. Indeed, based on this extreme interpretation, the Canadian government can now lay criminal charges against any credit union that uses the term “bank,” “banker,” or “banking”.

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Governmental Overreach? Reasonable Regulation? Or Lobbying Coup?

OSFI regulators defend their decision, saying they are merely “providing clarity regarding interpretation of provisions that are being applied inconsistently.”

That may be the story they spin publicly, but it doesn’t seem to pass the sniff test. Why now? And why take such a hard line? Is it perhaps because some of Canada’s credit unions have grown to the super-regional size, capable of serving Canadians from coast to coast?

Such speculation has left many in Canada believing the OSFI’s move is one of the greatest lobbying triumphs in history. Did banking lobbyists — who can out punch their credit union rivals by a factor of 10 to 1 — score a major victory? It’s entirely possible. In fact, it’s the most plausible explanation circulating.

Politically speaking, this could be regulators’ way of telling super huge credit unions that they had better watch out. They can let the credit union industry stew in a looming B-word ban for a few months, then pull back after achieving concessions. That way everyone can “win” — banks, credit unions, regulators and lobbyists.

And if history is any indicator, banks love to fight like this; it wouldn’t be a first. In 2012, bankers in Vermont convinced regulators to prohibit VSECU (Vermont State Employees Credit Union) from using “banks” and “banking” in marketing, communications and advertising, a decision that was subsequently walked back.  And some of the things bankers did to one credit union in Iowa after failing to get lawmakers on their side are simply unimaginable. The battle between banks and credit unions can definitely get dirty, particularly when banks resort to guerilla warfare.

For context, keep in mind that there are 278 community-based credit unions and caisses populaires in Canada, with assets of $205 billion (USD $159 billion). Credit unions in Canada provide banking services to over 5.6 million members — equivalent to about a sixth of the country’s entire population. By comparison, Canada’s big five banks — RBC, TD, Scotiabank, BMO and CIBC — have over $4 trillion in assets (USD $3.1 trillion). That’s 11 times more than all the credit unions in Canada.

Key Question: Do credit unions in the U.S. face similar risks as their Canadian peers? Could federal regulators prohibit American credit unions from using banking-related terminology?

Undoubtedly banking lobbyists in America will feel invigorated by the decision made by Canadian regulators. And in a world where Trump won a presidential race that nearly everyone said was unwinnable, you should (1) not rule anything out, and (2) be reluctant to make any unqualified predictions.

For Canadian Credit Union Marketers, It’s An Utter Nightmare

According to the Canadian Credit Union Association, credit unions in Canada have used the verb “bank” and the term “banking” to describe what they do — without penalty, and for many years — with the tacit support of federal officials.

“Ottawa is telling credit unions to stop using the words Canadians use to describe the work we do,” said Martha Durdin, CCUA’s president & CEO. “This rule will prevent credit unions from advertising their ‘business banking’ services or even having an ‘on-line banking’ button on a website. Having to create and popularize new words is an unnecessary and expensive undertaking, and will make it difficult for credit unions to compete fairly with banks.”

Credit unions across Canada have unanimously expressed disgust with the OSFI decision. Many are simply dumbstruck, struggling to find words beyond “ridiculous”, “silly” and “absurd” to describe their feelings.

“It smacks of school yard bullying by the biggest kid who decides nobody should have pudding cups but him,” says Jeremy Whittingstall, a Canadian credit union advocate, in a post on LinkedIn. “This goes far beyond just changing a term for your services or coming up with a new tag line. What this really will do is hurt every credit union’s ability to stay competitive. For credit unions having to suddenly redefine what they do, this is going to cause a laundry list of problems for their online strategy.”

True that.

Just think about the nightmare that Canadian credit unions will face with their search optimization strategy. If credit unions can’t use any “bank” related terminology on their websites, it will be nearly impossible for consumers to find them on Google. After all, everyone calls them “bank accounts”, and no one will ever Google for something like “share draft account.” One small Canadian credit union told reporters they will have to remove 2,000 references to the banned B-word from their modest website. Guh… what a chore. And kiss all that good SEO juice goodbye.

And the digital misery doesn’t stop there. Just think about Facebook for instance. What’s a Canadian credit union to do when fans leave comments on their corporate page about how they enjoy “banking” there and love the “mobile banking app?” Are they supposed to police this language? Delete the comments?

The situation will be at best extremely awkward for credit unions. But it could also turn out to be one of the most difficult and costly escapades in the history of the Canadian credit union movement.

Can You Really Trademark a Verb?

This situation has many credit union supporters questioning the fundamentals of trademark law. For instance, Jeremy Whittingstall is among those wondering if you can even claim trademark protection for a word commonly used as a verb.

“What makes this move so surprising is that trademarks do not usually extend to words that have become so generalized as to become part of the public lexicon,” Whittingstall gripes. “To suggest that a service used more frequently as a verb than to describe a place of business is no longer usable by those who provide that service is simply ludicrous.”

He’s actually got a point. There are a number of famous examples where terms that were once federally-protected trademarks are now words so commonly used that they have become public domain. Such “genericized trademarks” as they are called include the word “escalator”, which was originally a trademark of the Otis Elevator Company. “Laundromat” was once a Westinghouse trademark.

Other examples of genericized trademarks include aspirin (which belonged to Bayer), thermos, trampoline, dry ice and cellophane. Other terms, however, are still protected trademarks despite the fact that they have been culturally hijacked — e.g., Kleenex, Band-Aid, Ping Pong, Popsicle and Styrofoam.

So it isn’t always clear when and why a term should be trademarked, and when or why it has been deemed genericized at a legal level. But that doesn’t seem to apply here in this debate. You see, the fundamental idea underpinning “banking” is the concept of “stockpiling” — a place, site or facility where things of a common nature are stored and managed (e.g., “memory bank”). This includes any type of “repository” where items are warehoused (e.g., a “Blood Bank”, “Eye Bank” or “Sperm Bank”).

CUNA, the trade association for credit unions in the U.S., has previously addressed the thorny subject of “banking” terminology. A whitepaper commissioned by CUNA back in 2005 acknowledges the B-word’s ubiquity, and the futility of trying to fight it. In their analysis, they concluded that trying to ban “banking” would be a fruitless task — not worth the trouble because it is no big deal to consumers — and that “bank” is a generic term with no reasonable alternative.

Even the Canadian regulators behind the B-word ban seem to understand the slippery interpretations that can be applied to the term “bank”. That’s why they list a number of exceptions as part of their new, stricter regulations. “Food Banks” that collect and stock food, as well as “Gene Banks” that conduct genetic research, are among the entities the OSFI excludes from the ban. Why? Because they are places that “store” and “stockpile” things… just not money.

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