Although they aren’t frequently thought about when it comes to borrowing and lending, credit unions are an excellent choice for both investing your money and when you want to borrow some. That is why so many Canadian credit unions are jumping with joy with the new “banking” distinction reevaluation.
Federal regulators have decided to rethink a ban on allowing credit unions to use terms such as “banking,” “banker” and “bank” in both their communications and their marketing efforts.
Credit Unions Fight For Their Rights
The Office of the Superintendent of Financial Institutions announced that they have asked the Department of Finance to reconsider a ruling that would prevent credit unions from using financial terms related to banking, insisting that the ban is unreasonable and unnecessary. Credit unions have been fighting the regulation since it was first proposed.
Canadian Credit Association officials believe that it is absurd since millions of Canadians use credit unions for all of their banking needs. By taking away the use of any “banking” speech, it negates their function entirely.
It isn’t a total victory, however. The credit unions will be allowed to voice their opposition and be heard before any final decision is made. A Winnipeg credit union is just excited that they will be heard at all. Outside of just the Quebec province, there are over 275 credit unions who would be impacted if the law makes using those words obsolete.
Right now many lawmakers appear to be on the side of the credit unions. There isn’t much resistance to stop the ruling and new classification. The credit unions also want a review of the fact that, unlike their US counterparts who are not subjected to taxes, the credit unions across Canada are.
Since they are no different than banks, which are not subject to tax, it seems unfair at best that they are held to a higher accountability when they both perform the same function in society.
Those who are in opposition to the change believe that disallowing credit unions to label themselves for what they do will put them at a disadvantage against big banks. That could have a disastrous effect on the overall Canadian market by causing confusion to a growing financial segment in the Canadian market.
Currently, credit unions have about the same deposit and asset growth as traditional banking institutions, but are significantly behind in non-interest revenue.
For credit unions to survive in the current atmosphere, they shouldn’t have to pay taxes when the banks don’t, and they should be able to market themselves according to what they are, full-service financial institutions no different from the banks across Canada.
One Way Banks And Credit Unions Differ
The one way that credit unions do differ is that they currently don’t have the stigma that banking institutions do. Credit unions don’t survive on being huge banking institutions like Wells Fargo. They survive on the individual satisfaction that their members enjoy.
They rise and fall by the customer service that they provide their members, not simply by being a bank that is too big to fail.
Although it’s just a matter of a couple of words, there is no reason that credit unions should be banned from using the words that describe what they do. It would be like a dog-walking service not being able to use the word “walk” in their marketing.
While credit unions are fighting for their piece of the market, not being able to let potential members know what their services are is a huge disadvantage. One without any basis for banning the use of the words. They might not be a “bank” per se, but they perform the same processes and services as banking institutions.
Whether they will be able to use the words “bank,” “banker” or banking” may or may not limit a credit union’s ability to recruit and grow. In the end, however, it isn’t as much about the words they use as it is about the opportunities they provide and how satisfied their members are.
Happy credit union members become the best advertising, whether they can use the terms related to banking or not shouldn’t really matter at all.
Hi, my name is Jon and I run Compounding Pennies. I’ve been interested in personal finance since high school and love writing and talking about it. You can learn more about me in the Authors section of this site.