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News Now

CU System
VSECU banking cease-desist hearing to be set
MONTPELIER. Vt. (8/23/12)--A pre-conference hearing was held Wednesday with representatives of Vermont State Employees CU (VSECU) and the Vermont Department of Financial Regulation (DFR) about a possible cease-and-desist order over VSECU's use of the words "bank" and "banking" in its marketing materials.

At the pre-conference hearing attended by about 15 people, independent hearing officer Robert Simpson, a retired Chittendon County State Attorney, took care of the "housekeeping" chores. He introduced attorneys for both sides, Joe Bergeron, president of the Association of Vermont Credit Unions, who attended the hearing, told News Now.  

"Not a lot happened," Bergeron said. "Simpson told both parties to work out an agreement for processes, dates and timelines among themselves and to get back to him by the end of this week. The parties also discussed what to keep confidential and what not to."

The final hearing could be as late as the second half of October, Bergeron said.

Cliff Peterson, DFR general counsel, was the lead attorney representing the state, and Jackie Hughes, of KSE partners, represented VSECU. Some Occupy Wall Street people also attended, Bergeron said.

DFR, which regulates state-chartered credit unions and banks, issued a notice June 18 to the Montpelier-based VSECU of its intent to issue a cease-and-desist order barring VSECU from using the words. DFR said it was concerned that consumers and members are confused when the credit union uses the words. The $573 million asset VSECU requested a hearing over the matter (News Now July 19 and 20).

"We have worked hard over the years to educate consumers about the difference between a bank and a credit union. We have never called ourselves a bank nor have we ever tried to fool members or consumers into thinking we are a bank," VSECU CEO Steven D. Post wrote in the message posted on the credit union's website last month.

In a frequently asked questions section, the credit union outlined implications for state-chartered credit unions that could develop if the DFR succeeded in the ban, which "would be very unfortunate for Vermonters and set a very bad precedent in Vermont," it said.

Federal credit unions in the state "are not subject to any Vermont ruling that comes from this enforcement action and therefore can continue using the words "banks" and "banking" without penalty," the credit union said.

"It would mean that VSECU and other state-chartered credit unions would not be able to simply, fairly and accurately describe who they are and what kind of services they offer such as: mobile banking, banking online, banking solutions, 'you can bank at a credit union,' 'we're redefining banking,' 'our credit union is a banking alternative,'" said the credit union.

Banning the words "would clearly put VSECU and other state-chartered credit unions at a competitive disadvantage since federally chartered credit unions can use these terms freely," it said.


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