MONTPELIER, Vt.-After a tumultuous summer, Vermont State Employees CU and the state's Department of Financial Regulation have reached an agreement over the CU's use of the words "bank" and "banking."

The two spent the past several months at loggerheads after the DFR issued the 48,000-member, $599-million CU a cease-and-desist letter instructing it to quit using the phrases in its ad campaigns. The credit union fought back and the two were headed for a formal hearing on Oct. 24, until an announcement late on Oct. 5 that both groups had come to an agreement.

VSECU CEO Steve Post told Credit Union Journal that the hearing officer had "requested that the two parties engage in sincere negotiations or discussions in an effort to resolve the dispute" before the scheduled hearing. As a result of those meetings, VSECU learned that the regulator's primary concern was making clear in the credit union's advertising that it was a CU, "and they thought that our use of the word 'banking' confused that issue, so it was actually pretty easy for us to agree that we don't want that confusion and we can easily remedy that."

As a result of this, the DFR has issued new rules about what state chartered credit unions can and can't do in their ad campaigns, including avoiding phrases such as "banking cooperative," "banking co-op" or "any other similar sounding word or name in its advertising and marketing."

The DFR also ruled that VSECU's advertisements must clearly state that it is a credit union and not a bank.

"We were actually branding the institution as VSECU, so the words credit union do not necessarily appear in our advertising," said Post. "That was part of their concern, that we were choosing a brand, if you will, that made it less clear than they would like it, even though our advertising always speaks to us being a credit union."

But Post noted that the credit union rule only applies when words like "bank" are used in advertising. "If we advertise without using the word 'banking,' we don't have to meet that standard," he explained.

 

Not the First Dispute

VSECU had a similar run-in with the DFR a few years ago, but Post said that "one of the positive outcomes of this is that we finally got it handled in a way that eliminates confusion and puts the issue to bed."

One issue that has not been put to bed, however, is the relationship-to the extent that one exists-between CUs in the state and the Vermont Bankers Association, a group that VSECU initially believed was driving the complaints about its advertising.

The VBA "did not heartily embrace the decision of the commissioner, but that does not surprise me," said Post, adding that there have been no discussions with the VBA since the agreement was finalized.

VSECU saw a groundswell of support from its members-and from CU members across the state-but the credit union has no plans to market itself differently (beyond what it has already agreed to with the DFR) or to try to capitalize on that member support.

"We don't like getting into big disputes with our regulator and we're just happy to have this one resolved to both sides' satisfaction," said Post. "We're going to just stay in the marketplace advertising who we are and what we do, and make it clear that we're a credit union."

 

 

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For More Information On This Story:

https://www.vsecu.com/about/communications/using-the-word-banking-is-clarified

http://www.dfr.vermont.gov/sites/default/files/Banking_Bulletin_37_0.pdf

Subscribers can read related stories at www.cujournal.com by typing the following headlines into the search function:

Hearing On 'Banking' Set For October

Where Can't Members Do Any 'Banking'? Apparently, Vermont

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