Your League has achieved another big regulatory win - this time, ensuring that both federal credit unions (FCUs) and Wisconsin's federally insured state-chartered credit unions (FISCUs) can use terms like "to bank" and "banking" in their communications.
Federal and state regulators have had conflicting interpretations on whether credit unions can legally use words like “bank” or “banking” to talk about themselves. The state has disapproved, citing Wisconsin banking and advertising laws, but the NCUA has said that FCUs can use such commonly understood, generic terms under federal advertising laws.
On May 11, the National Credit Union Administration (NCUA) officially issued a Legal Opinion Letter that approves the appropriate use of these terms for both FCUs and FISCUs in Wisconsin.
"NCUA rarely issues opinion letters - just a handful last year alone. But we went after this to put to rest a legal question that resulted in three state-chartered credit unions in our state receiving cease-and-desist letters last year," said Paul Guttormsson, League Vice President - Legal & Compliance. "Credit unions should be free to invite consumers to 'do your banking here.' That doesn’t mislead anyone about the differences between non-profit credit unions and for-profit banks. With this letter, all Wisconsin credit unions have clarity.”
“The NCUA has issued similar opinions on other states’ laws, but only for FCUs,” Guttormsson explained. “Now they’re extending their preemption to protect Wisconsin’s FISCUs, too. That’s a big deal. FISCUs around the country can point to this letter to push back when bankers try to impose such unreasonable restrictions in other states, too.”
Your League wrote to the NCUA last fall, seeking a legal opinion that the Federal Credit Union Act and the NCUA’s advertising regulations preempt two Wisconsin Statutes that the Wisconsin Department of Financial Institutions (DFI) said barred credit unions from using “bank” or “banking” in any form (with very limited exceptions).
From the beginning, we objected to the DFI issuing such a broad interpretation of a state statute, and without going through a formal rule-making process, requiring - among other things - public hearings providing stakeholder input.
NCUA's letter clarifies that both of the Wisconsin statutes “are preempted with respect to a federally insured credit union’s use of the word ‘bank’ as a verb to generally refer to the provision of financial services. This includes derivative terms such as ‘banking,’ ‘mobile banking’ or ‘online banking.’ For example, under the FCU Act and the NCUA’s advertising rule, a federal insured credit union would be permitted to state ‘Members who bank with us receive free mobile banking services.’”
The sole caution in the letter is a reminder that a federally insured credit union in Wisconsin cannot “refer to itself as a ‘bank’ or a ‘banking organization.’”
"It's always important to clarify ambiguity in the law so that credit unions can operate with clarity and confidence," Guttormsson said. "The League extends our thanks to the NCUA, as well as the Governor's office for their input that helped resolve the matter. We appreciate their efforts that not only offer clarity to credit unions, but also to consumers, who won’t be prevented from understanding what credit unions offer."
The League's Compliance Courier explains more.
The League and CUNA engage with credit union Activists in a 360-degree advocacy approach that helps credit unions positively shape their operating environment and remove barriers to serving members. Read more articles in our Unite for Good series.