MONTPELIER, Vt. (7/23/12)--In a message to its members,Vermont State Employees CU (VSECU) has outlined the possible implications of its battle with the state's regulator over the use of the words "banking" and "bank" in its marketing.
The state Department of Financial Regulation (DFR), which regulates state-chartered credit unions and banks, issued a notice June 18 of a cease-and-desist order from using the words, saying it was concerned that consumers and members are confused when the credit union uses the words. The $573 million asset VSECU has 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.
In a frequently asked questions section, the credit union outlined implications for state-chartered credit unions that could develop in 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.
"Rather than protecting the Vermont consumer against confusion, it will only create confusion, since not all types of financial institutions will be able to use the same generic vocabulary in public." It also "could make it more attractive for state-chartered credit unions to convert to a federal charter and Vermont will lose more and more local oversight of its credit union industry.
Saying that switching to a federal charter would be "the last thing" it wants, VSECU added it is "is a Vermont institution, owned and controlled and regulated by Vermonters and we want to remain state-chartered. That said, an adverse ruling on this action would force us to reconsider all of our options."
The credit union urged members who want to help to contact the department and other state officials and lawmakers or write a letter to the editor of their newspaper.