The services they offer and terminology they use are similar, but banks and credit unions continue to jealously guard their territory.

Protecting consumers from what it claims to be deceptive and confusing advertising was the impetus behind a recent protest by the Massachusetts Bankers Association directed to the chairman of the National Credit Union Administration, the latest shot in the turf war between the two industries.

The MBA sent a letter of complaint on Feb. 25 to Dennis Dollar, chairman of the NCUA, the governing body for credit unions, outlining “concerns” over recent advertisements by Needham Heights-based Direct Federal Credit Union, a $356 million-asset financial institution. The first portion of the letter dealt with usage of the term “federally insured” in the ads, while the second half of the missive questioned the credit union’s use of the word “banking.”

“They’ve [Direct Federal] had a campaign going for the last six to eight weeks,” said Daniel J. Forte, president of the MBA. The MBA, he said, was concerned that a radio ad describing the credit union’s deposits as federally insured was misleading and, worse, violated regulatory guidelines which stipulate that references to insurance at credit unions make it clear the insurance comes from the National Credit Union Share Insurance Fund.

“I think the implication there is that the federal government insures them or that the FDIC [Federal Deposit Insurance Corp.] insures them. The FDIC is really the one with the very deep pockets as opposed to their [National Credit Union Share Insurance] funds,” said Forte.

Forte said although credit unions try to “be like banks, to advertise that they’re insured the same way – insured by the federal government – is very misleading.”

Credit union officials disagree, however.

“I think the last thing credit unions want to do is try to convince people that they’re the same as banks. I think we want to differentiate,” said Robert B. Kimmett, senior vice president of the Massachusetts Credit Union League.

According to Louis L. Fabrizio, vice president of marketing at Direct Federal Credit Union, not specifying that the insurance comes from the National Credit Union Share Insurance Fund.

“With regard to the first part of the [MMA] letter, I reviewed our radio ads – there was an oversight on my part in not mentioning the deposit insurance is provided by the National Credit Union Administration. That oversight will be corrected right away,” he said.

Less than half a day passed between the time Fabrizio was notified by Banker & Tradesman of MBA’s letter and when he said he would correct the ads. But the MBA never notified Direct Federal of its concerns, nor did it call the local trade association, the Massachusetts Credit Union League.

Forte said direct contact would not have garnered the desired reaction. Forte said he would have called Direct Federal or MCUL “if my name were more recognizable.” Instead, association officials chose to go directly to the NCUA, both because it could take action and in case the MBA had mistakenly interpreted the code.

“The NCUA is the [credit union industry] regulator, so I’m sure the MBA can figure out there’s no point in them bringing those kinds of protests to the credit union trade group,” said Kimmett. “We wouldn’t be in a position or inclined to discipline our members about advertising even if we thought it was a reasonable request.”

Fabrizio kept his remarks regarding the letter brief. “In terms of the rest of the letter, all I can say is we really don’t agree with the assertions that were made in it,” said Fabrizio.

Nicholas N. Owens, spokesman for the NCUA, said the letter has been received. “The chairman of the agency has forwarded the letter to the office of general counsel for review,” he said. A response should be forthcoming within a week, he said.

“It seemed pretty straightforward and that there wasn’t anything that should confuse the consumer [in the ad],” said Kimmett.

‘Confusing’ or ‘Silly’?
The letter also gives voice to another divisive issue. It opposes the credit union industry’s use of the term “banking” in advertising. Forte said the use of the word is misleading but falls under a gray area of the law.

“For a credit union to say things like, ‘Come bank with us,’ or, ‘Come do your banking here,’ or, ‘Many bank products and services,’ in addition to the confusion with the insurance language, I think it begins to build on the reputation of the banking industry. They shouldn’t do that,” said Forte.

Forte suggested credit unions use terms like financial services, savings accounts, deposit accounts or credit share accounts instead of banking, which he contends could confuse the consumer.

But credit union leaders aren’t convinced that is the case.

“If we’re talking about the general range of credit unions, the word banking is a generic term for conducting financial services. I think it’s pretty silly to point at that as being an effort to confuse the consumer,” said Kimmett.

The goal of credit union advertising is to be as clear as possible so the consumer is left with no questions regarding the service available. “The idea that we’re going to be locked out of certain phrasing because of whatever reason and to the detriment of the consumer would be a bad thing,” said Kimmett.

Forte said he believed that the alleged violation regarding the references to insurance was an oversight and was happy to hear Direct Federal intended to correct that portion of its ad spot.

However, the issue of credit unions using the term banking in ads comes up regularly, Forte said.

“There’s a certain pattern to this. I’m not saying this is a deliberate attempt [by credit unions] to be confusing to consumers, but it is confusing. I can’t write a letter every time I see a little thing, but this seemed a pretty egregious error and we did want to point it out,” said Forte.

Kimmett, however, countered that it was an unusual occurrence and credit union advertising is, on the whole, very understandable.

But whether credit unions continue to use the term banking as an unavoidable, logical way to describe their services or such use should be viewed as confusing to consumers remains a topic of debate between credit union and bank industries.