MONTPELIER, Vt.-Vermont State Employees Credit Union (VSECU) is in a legal battle with the state's Department of Financial Regulation (DFR) over the CU's use of the term "bank" and "banking" in its marketing.
The DFR intends to issue a cease-and-desist order against VSECU that demands it not use those words in marketing and communications. VSECU is appealing the order.
The current conflict began last fall after Vermont State Employees began referring to itself in advertisements as a "banking cooperative." But VSECU and the DFR butted heads over the same issue as far back as five years ago, after the CU ran ads using member testimonials that referred to the its offerings as "banking" services. VSECU stopped that campaign, but got the DRF's approval to use the words "bank" and "banking" as part of its next campaign.
CEO Steve Post said that use of the term "banking cooperative" seems to "have triggered this interest again in our advertising and complaints against it," including complaints that credit union believes originate from the Vermont Bankers Association (VBA). "We use ('banking cooperative') because we believe it helps the consumer understand what a credit union is, and they're both absolutely truthful and honest descriptors of who we are and what we do."
VSECU believes it is being targeted by the DFR and the VBA because it is the largest state-chartered CU in Vermont. Others are using similar verbiage in their ads and collateral, but "we're the most visible to consumers in terms of advertising."
"We think this is a battle targeted at VSECU, and we don't have any interest in dragging other credit unions into it by highlighting that," said Post. "Everybody knows it's out there, and we're just out to defend our position. We really think that what they're doing is fundamentally unconstitutional in the way they're interpreting the law, and we're willing to defend ourselves."
A 'Constitutional' Issue
Post pointed out NCUA has already taken a position on this issue for federal CUs and OK'd the use of the word "banking." "We would be in a position in Vermont where we have five FCUs that could be in our marketplace using commonly understood language that consumers can relate to and we would be prohibited."
VSECU has posted about the issue on its website and social media profiles, but "we are not engaging our members with the intent of mobilizing them," said Post. "We are viewing this as a single legal, Constitutional issue at this point, and we see the potential for it to expand into a broader bank-versus-credit-union argument, but that's not our intent."
Post said VSECU expects a pre-conference hearing to take place in late August.