The banking industry's longstanding effort to deter or preventcredit unions from using the words “bank” and “banking” inadvertising was advanced to a new plateau last week with a proposedcease and desist order placed by the state's top regulator onthe $600 million Vermont State Employees Credit Union.

With the help of CUNA and the Association of Vermont CreditUnions, the Montpelier credit union was fighting back in both thepublic and private arena to reverse an intent order prior to ahearing in late August scheduled by Steve Kimbell, the Vermontcommissioner and head of the Department of Financial Regulationthat supervises, credit unions, banks and insurance firms.

• UPDATE, Oct. 8, 2012, Vermont Credit Union, Regulator Settle 'B' WordDispute

Supported by the industry in Vermont and nationwide, Steven Post, president/CEO of Vermont State Employees calledbankers' latest foray into clamping down on the bank language“ludicrous and amazing.” He vowed to turn back any cease and desistorder if the state follows through next month.

For his part, Kimbell, a Montpelier attorney and formerlobbyist, maintained the Vermont State Employees and other creditunions have a legitimate defense in continuing the common practiceof mentioning bank and banking in their TV ads, online and ingeneral marketing materials.

“Credit unions have some very persuasive arguments on their sideas to constitutional free speech,” said Kimbell as he outlinedlegal underpinnings for his June 18 cease and desist notice.

Kimbell, who has won active support of the Vermont BankersAssociation, told Credit Union Times he chose an administrativeprocedure based on a strict interpretation of Vermont's 1969 lawdealing with use of bank language by financial institutions otherthan banks in advertising.

Kimbell, who acknowledged he has quickly become the target ofharsh rhetoric from angry Vermont credit union leaders over theproposed order, said constitutional free speech is very much inplay.

Still, Kimbell said he has undertaken “a procedural action”against the state's second largest credit union based on concernsand complaints regarding Vermont State Employees advertising, whichmost recently was highlighted by a “redefining banking” marketingcampaign.

“It is not my job to make the law. That is a job for thelegislature,” stressed Kimbell, arguing his proposed cease anddesist order may include what he called some “torturedreasoning.”

The leadership of the Vermont Bankers Association, meanwhile,has maintained that that while many Vermont credit unions use bankand banking plus other bank-related terms in ads, “VSECU is themost flagrant and abuses the practice,” said a spokeswoman.

It remained uncertain how far the state, the Vermont BankersAssociation or CUNA might pursue the order's legality in court, butEric Richard, general counsel of CUNA, said in a statement that thetrade group fully supports VSECU. “The state regulator is taking anextraordinarily narrow view in its interpretation of state law onthis matter, and its conclusion is impractical, illogical anddetrimental,” he said. “We believe the credit union's appeal forfurther review should be granted. A reassessment is clearly inorder.”

Speaking last week during a Burlington TV newscast that alsofeatured Chris D'Elia, the CEO of the Vermont Bankers Association,Post said again the use of the word bank “is common language,commonly understood and everybody knows what itmeans.” 

But D'Elia complained that credit unions, based on Vermont law,“are not allowed to use banking terminology and shouldn't be usingit. It's plain and simple.” 

Post argued that the term banking is so common “that if you wereto go up to the average member and ask, what type of services doyou receive here? They would answer banking.”

In explaining the VSECU position on its website, Post haspointed to federal law, which does not bar federally charteredcredit unions from using bank in ads and cited several that havecurrent campaigns with bank in them.

“Federal credit unions in the state are not subject to anyVermont ruling that comes from this enforcement action andtherefore can continue using the words banks and banking withoutpenalty,” the credit union said.

If a cease and desist order is slapped on VSECU, Post said hewould consider the option of switching to a federalcharter.