Bank, banker, banking — are three little words that the Northern Savings Credit Union may be prohibited to use in the near future.
The federal government’s Department of Finance has suggested in a consultation paper that an updated and revised Bank Act include more restrictions on which institution can use the word “bank.”
On June 30, an advisory went out to credit unions from the Office of the Superintendent of Financial Institutions Canada (OSFI) in which the federal regulator stated it has observed an increased use of the words “bank,” “banker” and “banking” by non-bank financial service providers. OSFI had stated that it expected non-banks to remove the words from their websites by Dec. 31, from all print materials by June 30, 2019 and all physical signage by June 30, 2019.
In a periodic review of the Bank Act, the Department of Finance suggested that the words be limited to provide “appropriate disclosure to consumers and to mitigate marketplace confusion.” But the subject has created more confusion over the semantics of the word.
“Our members of the credit union, they often say I’m going to the bank, because they’re banking. That’s the whole piece, is it a verb or is it a proprietary word that only certain institutions can use?” Fay Booker, interim CEO and president of the Northern Savings Credit Union, said.
Banks are regulated federally, and credit unions — a financial co-operative owned by its members — are regulated provincially. In the federal consultation document released on Aug. 11, the Department of Finance points out that provincial credit unions, which aren’t banks, are using the term “banking” to describe their activities, such as online “banking” rather than using the term “online transaction accounts.”
Rebranding will sting credit unions, such as the Credit Union Atlantic that uses the slogan “the better way to bank” on its website and signage. But Booker said that Northern Savings has already made some efforts in rewording its services.
“We used to have personal banking officers. We’ve changed those to financial services reps. We got rid of the word bank in their title,” she said, adding that Northern Savings is not using the word bank in its legal name. “When you start getting into costs look at the website because we have online banking. We could change it to online account management. That’s the difficulty, how do you replace the word bank?” Booker said.
There are more than 600 credit unions in Canada with almost 3,000 branches. The Canadian Credit Union Association represents 278 credit unions and has lobbied to reverse the suggested limitations on the word, and to be allowed to continue using the words without a criminal charge. “They’ve done a good job of explaining that this is a common word that the average person uses,” Booker said.
As a result of some of the feedback on the advisory, the federal government has decided to review the condition in the consultation paper on the Bank Act, and for the time being credit unions are off the hook on rebranding their services.
Correction: In the initial Aug. 28 version of this story, we stated that the federal regulator, Office of the Superintendent of Financial Institutions Canada (OSFI), had suggested that the updated Bank Act include more restrictions on which institution can use the word “bank” but OSFI had sent the advisory to credit unions based on the Department of Finance’s suggestions in the government’s consultation paper.