Here’s an excerpt from a response from the Canadian Credit Union Association: “Provincially regulated, credit unions have operated in Canada since 1908 and have evolved to provide the same lending, deposit-taking and wealth management services as federally chartered banks. They have the same–or higher–deposit protection as banks, and operate in 380 communities that are not locally served by Canada’s largest banks. And credit unions have used the verb ‘bank’ and the term ‘banking’ to describe what they do, without penalty, for years with the tacit support of federal officials.”
Why now? The largest credit unions in Canada have grown to a significant size and a new federal charter is enabling some of the largest credit unions to pursue a national expansion strategy. Plus, with the advent of so many non-bank, unregulated fintech startups hitting the market, the big banks, lead by the Canadian Bankers Association, have lobbied hard to OSFI to enforce the rules. Unfortunately, credit unions are lumped into the non-bank category even though they are regulated.
Jeffry Pilcher, editor of The Financial Brand, has written a comprehensive article, “Canadians Banned From ‘Banking’ At Credit Unions,” that gives an excellent overview and analysis of the ruling and potential impact.
Some important things to think about regarding this issue include the following:
- CCUA and credit unions have been well aware of this potential decision. It’s been discussed at length at every provincial and national conference for the past year.
- Credit union leaders are not being your typical polite Canadians on this. There is considerable social media activation and grass-roots lobbying of local members of parliament and the minister of finance going on. CCUA has done a good job of communicating out and activating the credit union industry across the country; the issue has garnered a lot of media attention.
- Canadian credit unions are taxed, so the issue of tax breaks and burden don’t apply to Canadian credit unions when having discussions with banks.
This decision will have a significant impact on Canadian credit unions. If the decision sticks, credit unions will need to come together to figure out a collective solution to bring renewed emphasis on defining what a credit union is and how to identify the services that credit unions offer.
To make matters more complicated, credit unions in Canada have been moving away from the credit union brand for some time now. In fact, 11 of the largest 20 Canadian credit unions have dropped “credit union” from their outward branding. This rule enforcement could be the catalyst needed to get back to the cooperative roots and for credit unions to really define their own place in the Canadian consumers’ minds.
From the U.S. credit union industry’s perspective, this issue is hitting pretty close to home and causing many credit union leaders to wonder if the same thing may happen in the United States. Keep in mind, the Canadian rule has been part of the Canadian Bank Act for some time and is only now being enforced. In the United States, legislation would first need to be changed before any enforcement would happen. This makes getting rid of the “B” word a significantly harder task for U.S. bank lobbyists; however, the potential is still there.
We’ll see how it all plays out.
Tim McAlpine is president and creative director of Currency Marketing. He is best known for developing the Young & Free Marketing Program and the It’s a Money Thing Financial Education Program that credit unions from around North America are using to connect with new young adult members. He is also the driving force behind CUES Next Top Credit Union Exec competition and a co-founder of the CU Water Cooler. In addition, he is chair of $40 million Mount Lehman Credit Union, Mount Lehman, British Columbia.
