VSECU appeals state decision to prohibit use of the word “banking” in the credit union’s advertisements

Vermont State Employees Credit Union CEO Steve Post in his office in Montpelier. VTD Photo/Taylor Dobbs

Vermont State Employees Credit Union CEO Steve Post in his office in Montpelier. VTD Photo/Taylor Dobbs

VSECU is appealing a decision from the Department of Financial Regulation that would prohibit the credit union from using the word “banking” in advertisements.

Last month Steve Kimbell, commissioner of the department, issued a “notice of intent” to issue a cease and desist order to VSECU, giving the credit union 30 days to stop using the “banking” in advertisements to describe its activities.

On Monday, VSECU appealed the decision. The pre-hearing for VSECU is tentatively scheduled for 9 a.m. Aug. 22 in Montpelier. The 30 day cease and desist order is now in abeyance until the department issues a decision after the hearing.

Under state statute, credit unions may not transact business as a bank and may not advertise their services as banking.

At issue is whether consumers are confused when a credit union, which may have many of the same financial services as a bank, uses the word “banking.”

Steven Post, CEO and president of VSECU, says the word “banking” best describes the services the nonprofit cooperative offers. It’s hard, he says, to replace “banking” with “credit unioning.”

Post says he was “stunned” by the department’s action, and he says Kimbell didn’t rule in a “rational way.”

“The basic issue as we see it is we are using truthful, accurate words to describe what we do and who we are,” Post says. “The word ‘banking’ is ubiquitous, truthful, nonconfusing and commonly understood by consumers.”

The department first reprimanded VSECU in 2007 for a series of ads. After that, Post says, the credit union frequently sent ads to the department for review. The issue laid dormant until last fall when VSECU began to use the descriptor “banking cooperative” in its advertising.

Kimbell says this term is confusing for consumers and could lead members of the public to believe a credit union is in fact a bank. Under the law, credit unions can’t call themselves banks, and banks can’t call themselves credit unions, Kimbell says.

“The theory underlying the legislation on the books is consumer protection,” Kimbell says. “Consumers need to know what kind of financial institution they’re dealing with, and I suspect we’ll look into how valid that need is any more.”

Post says he is keen to maintain the distinction between the two entities, but the phrase “banking cooperative” helps to define what a credit union is.

Though banks and credit unions deliver the same products and services, Post says, there are major structural differences between the two entities.

VSECU is a nonprofit cooperative owned by its members; commercial banks are for-profit entities. Many of the state’s 26 approved credit unions are small, local entities. VSECU is the only statewide credit union. It has 50,000 members, total assets of $600 million and a reserve pool of $48 million, or roughly 8 percent of assets. The credit union pays sales, property and payroll taxes, but because it is a nonprofit, VSECU does not have to pay the deposit franchise tax assessed on Vermont banks.

The National Credit Union Administration has already ruled that federally chartered credit unions can use the word “banking.”

Post says the Department of Financial Regulation is taking a unique and narrow position on the issue; Kimbell says 25 states have similar rules.

For Kimbell, the advertising issue raises larger questions about the differences between credit unions and banks.

“The crux of the matter is, is that distinction necessary more?” he asks. “Then it begs the question, why don’t we tax you just like the banks? I don’t know what the answer is.”

If the department rules against the credit union, Post says he’ll seek relief in the courts.

“We’re willing to defend our position,” Post says. “We think their interpretation of the statute is misguided. We should not be prohibited from describing our products as they are.”

Kimbell says he has to interpret state statute the way it is written. “We execute and enforce the laws the Legislature writes,” Kimbell says. “I don’t think I’ve got the power to say to any bank or credit union, ‘call yourself anything you want.’ The remedy is with the Legislature.”

Kimbell says an impartial hearing officer will make a recommendation. Ultimately, the commissioner will decide.

VSECU is represented by Kimbell’s old firm, KSE Partners, and Storrow, Buckley, Hughes. The commissioner said he has never represented VSECU himself and the association with his former company would have no bearing on his decision. He pointed to his decision last fall to nix the Fletcher Allen Health Care proposal to spin off dialysis units to Fresenius, a German conglomerate, as an example of his impartiality. Fletcher Allen is a client of KSE Partners.

“That doesn’t stop me from doing my job,” Kimbell says.

He says it’s important to bring the case before a hearing officer because of the controversial nature of the issue.

Chris D’Elia, executive director of the Vermont Bankers Association, could not be reached for comment.


Anne Galloway

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21 Comments on "VSECU appeals state decision to prohibit use of the word “banking” in the credit union’s advertisements"

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Paul Hannan
3 years 11 months ago

Hmmm…Sounds like we may need to find a new word for where river meets land lest we all run afoul of DFR. How ’bout we call it the “river eat-more-kale.” Oh, I guess that’s got problems too. Well, we’ll think of something.

Sheryl Rapee-Adams
3 years 11 months ago

We use VSECU for checking, savings, mortgage, credit card. It quacks like a bank to me.

Pam Ladds
3 years 11 months ago

Well I guess we can see who is a member of the Banksters! How thoughtful of DFR to have the interests of us poor little “consumers” at heart. Now where was their care and consideration when we were (and still are) being ripped off the Too Big to Fail Banks? While it is obvious that changing the word “banking” to something else is unnecessary it might actually be worth doing. Anything to encourage all of us to leave the Wall Street Mob and switch to investing locally.

Avram Patt
3 years 11 months ago
(Disclaimer: I am the manager of a different type of cooperative and knowledgeable about the cooperative business model generally. This comment is my own personal opinion.) We have had two VSECU memberships in our household since 1987, and a variety of “banking” accounts there: checking, deposits, loans, credit cards… I am surprised that the Department of Financial Regulation has chosen to pick this fight and don’t understand how it serves the public. I have actually read the DFR documents attached to this story. Ultimately, the meaning of words will be argued by lawyers and maybe in the Legislature, but my… Read more »
Renée Carpenter
3 years 11 months ago

I’m a consumer and I’m not at all confused: Our credit unions are cooperative banks. If the laws don’t allow for clear and simple language, it is time to change those laws.

Page Guertin
3 years 11 months ago
Here’s the statute: “No person shall advertise or put forth any sign as a bank, banking association, or trust company, or in any way solicit or receive deposits or transact business as a bank, banking association, financial institution or trust company, or use the words “bank,” “banking association,” or “trust company” or other similar sounding word or name unless it is a financial institution reporting to and under the supervision of the commissioner or is authorized to conduct such business in this state under federal law, or unless the commissioner approves the activity or word or name used in writing… Read more »
Jason Farrell
3 years 11 months ago

While the article states that “Under state statute, credit unions may not transact business as a bank and may not advertise their services as banking.”, Vermont State Statute does appear to include credit unions in their definition of “bank”. From the statute:

“Bank” means a person engaged in the business of banking, including a savings bank, savings and loan association, credit union, or trust compan;.

http://www.leg.state.vt.us/statutes/fullsection.cfm?Title=09A&Chapter=004&Section=00105

Are there conflicting statutes? I’ve not yet been able to find the Vermont statute that prohibits credit unions from transacting business as a “bank”.

Grace Adams
3 years 11 months ago

I HAVE BEEN A MEMBER OF VSECU SINE 1981, I NEVER GO TO A
“BANK”, BECAUSE THEY COST TOO MUCH.
I THINK YOU ARE BEING PRESSURED BY THE “BIG BANKS”, BECAUSE
THEY ARE LOSING MONEY. THEIR PERSONNEL ARE NOT PLESANT,
AND ALWAYS LOOKING FOR THEIR BOTTOM LINE.

STAY COOL AND LOOK FOR REAL ISSUES.

JOHN BRABANT
3 years 11 months ago
Wow, all this time I thought I was doing my “banking” at VSECU with a for profit bank. Thanks Steve for the heads up and for clearing the air. I mean, the very name “Vermont State Employees Credit Union” clearly isn’t enough avoid the very likely conclusion with this misappropriation of the terms “bank” or “banking” that I had been BANKING and that BANKING was being done with the likes of a Goldman-Sachs style entity. All this time I have been managing my family’s finances with an entity that clearly has no influence with the likes of the Obama or… Read more »
Donald Kreis
3 years 11 months ago
I heartily concur with the comments of my friend Avram Patt. The Department of Financial Regulation has adopted a strained interpretation of the relevant statutes that would not survive scrutiny by the Vermont Supreme Court. I hope the VSECU pursues this matter before that tribunal if it comes to that. Statutes must be interpreted according to their plain meaning. Even if the use of the word “bank” in section 14103 were ambiguous, statutory ambiguities are resolved in a manner that advances their fundamental purpose. Here, that purpose is clearly to protect the public from fraudulent activity — not to prevent… Read more »
Ronald Pulcer
3 years 11 months ago
I am a recent VSECU member (for almost a year now). I also belong to two other credit unions, one in Vermont and one in another state. I have been a member of a credit union for over 25 years. Why did I initially join a credit union? I was originally a customer of two banks. I had a very frustrating experience with each bank. In both cases, they essentially “misplaced” or “lost” a large chunk of my money, at a time when I really needed the bank to come through (wire money for down payment on first home purchase,… Read more »
Ronald Pulcer
3 years 11 months ago

How about this approach? …

VSECU will stop using the word “bank”, if/when the members banks of Vermont Bankers Association cease and desist in their use of the word “credit”?

Check out these targeted Google searches of some credit union websites using the word “bank” in comparison to the following bank websites using the word “credit”:

https://www.google.com/search?q=site%3Ahfcuvt.com+bank
https://www.google.com/search?q=site%3Avsecu.com+bank
https://www.google.com/search?q=site%3Amsufcuvt.org+bank

https://www.google.com/search?q=site%3Avtbanker.com+credit

https://www.google.com/search?q=site%3Abankofamerica.com+credit
https://www.google.com/search?q=site%3Aberkshirebank.com+credit
https://www.google.com/search?q=site%3Abrattbank.com+credit
https://www.google.com/search?q=site%3Acitizens.com+credit
https://www.google.com/search?q=site%3Acfsgtrust.com+credit
https://www.google.com/search?q=site%3Acommunitynationalbank.com+credit
https://www.google.com/search?q=site%3Acrbna.com+credit
https://www.google.com/search?q=site%3Afnborwell.com+credit
https://www.google.com/search?q=site%3Akeybank.com+credit
https://www.google.com/search?q=site%3Alakesunbank.com+credit
https://www.google.com/search?q=site%3Aledyardbank.com+credit
https://www.google.com/search?q=site%3Amascomabank.com+credit
https://www.google.com/search?q=site%3Ambvt.com+credit
https://www.google.com/search?q=site%3Anationalbankmiddlebury.com +credit
https://www.google.com/search?q=site%3Anbtbank.com+credit
https://www.google.com/search?q=site%3Ansbvt.com+credit
https://www.google.com/search?q=site%3Apassumpsicbank.com+credit
https://www.google.com/search?q=site%3Apeoplestrustcompany.com+credit
https://www.google.com/search?q=site%3Apeoples.com+credit
https://www.google.com/search?q=site%3Arnbvt.com +credit
https://www.google.com/search?q=site%3Atdbank.com+credit
https://www.google.com/search?q=site%3Athebankofbennington.com+credit
https://www.google.com/search?q=site%3Atcvermont.com+credit
https://www.google.com/search?q=site%3Aunionbankvt.com+credit
https://www.google.com/search?q=site%3Awrsb.com+credit

Ronald Pulcer
3 years 11 months ago
Check out this quote found on the history page of VermontCreditUnions.com: “It is the contention of the credit union…that political democracy can be most securely buttressed by economic democracy. Logically, it should come to pass eventually that the masses of the people…will control in credit unions an appreciable segment of the national wealth. When they do, the great danger to our democracy that is contained in the trend to the control of a greater and ever greater proportion of the national wealth in an everdecreasing number of the people will be forever eliminated. There will result from this new accumulation… Read more »
Marjorie Power
3 years 11 months ago
At first my reaction to this furore was “What are they thinking!” Then, reading the quotes from Commissioner Kimbell, it became clear. Then it begs the question, why don’t we tax you just like the banks? I don’t know what the answer is.” So here is the scenario. Public is outraged by the stupidity of the cease and desist order. Public demands a change to legislation enabling the credit union to use the words “banking” etc. in its advertising. While the bill is being considered, banking lobbyists assisted by the DFR suggest that if credit unions are banks they might… Read more »
Don Kreis
3 years 11 months ago

I must respectfully disagree with Margaret Power. In essence she argues that credit unions and other cooperatives should try to stay as invisible as possible lest the powers that be — bank lobbyists, etc. — discover what co-ops are up to. This is not a longterm strategy for success.

If credit unions enjoy tax advantages it is because, unlike banks, there are no outside investors extracting wealth from the communities they serve. This point can be made, as necessary, at the State House.

Don Kreis
3 years 11 months ago
Well . . . I find myself in the position of needing to revise my previously expressed opinion somewhat. I am concerned about this quote, attributed to Commissioner Kimbell by the Times Argus: “If I’m a state-chartered bank and I pay the bank franchise tax and I’m in competition with a credit union providing very similar services, I think I’d take exception if they started pitching themselves as a place to do banking . . . .If the credit unions want to pay the franchise tax, they can go ahead and do that.” Although a hearing examiner will conduct next… Read more »
Avram Patt
3 years 11 months ago

I agree with Don Kreis. The more we hear from the DFR, the more, I really regret to say this, it begins to have an odor…

Jed Guertin
3 years 11 months ago

Dear Mr. Post,

You have above a list of VSECU members who, I’m sure, would be happy to provide you with comments like:

“I’ve been a member of the VSECU for over 20 years and have done all my banking there, from credit and debit card, checking account, savings account, CD’s, mortgage, car loan, business loan, etc. with them. I’ve done so with the greatest confidence in their banking skills and honesty.”

Simply put their comments in your advertising. Let Mr. Kimble abuse them of the fact that they’re not banking with the credit union.

Jed Guertin
3 years 11 months ago

Dear Mr. Post,

May be the credit union could have a competition for its members,

Each VSECU member submits a comment about the credit union. The best 3 comments receive $50.00 gift certificates to any restaurant of their choice. Those winning comments are used in VSECU’s advertising. And all the comments are posted on the VSECU website.

What fun.

walter moses
3 years 11 months ago

OMG–what about community food BANKS? What will Kimbell do now?????
And then there are piggy BANKS!!!! Maybe porcine savings containers?????

Laura Enock
3 years 8 months ago
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