English is a funny language. It’s got all sorts of rules, then all sorts of exceptions, then some things that don’t follow any logic at all. In other words, English is a lot like a banking regulator. And English also has nouns that double as verbs. Like the word “bank.” Sometimes we go to the bank. And what do we do there? We bank. But what do we do when we go to a credit union? Do we unionize?

Most people, when they go to a credit union, go there to do their banking. They may or may not understand that they’re at a credit union. But they’re pretty sure that if they’re putting deposits into an account, and are able to create negotiable orders of withdrawal off that account, and if they’re getting hit up by the customer service rep to take out a car loan and sign up for direct deposit, that they’re doing banking.

When I ask my wife what she’s doing all day on the computer, she snarls at me that she’s hip-deep in handling our banking, meaning she’s moving about $20 from one online account to another at Fidelity.

So it does seem to be commonly accepted that one can conduct banking at someplace other than a bank. Well, commonly accepted everywhere — except in Vermont. And by that, I specifically mean the Vermont Department of Financial Regulation.

They’re not just roasting coffee up in the Green Mountain State; they appear to be roasting credit unions, too.  In a couple of weeks, there’s going to be a big hearing to figure out if credit unions – which are not banks as a noun — can actually employ the word banking as a verb in their advertising. Because right now, Vermont’s biggest credit union is under a cease-and-desist order to knock that talk off.

Law-Law Land

The Vermont State Employees Credit Union is not just for Vermont state employees. The $600 million institution is the biggest credit union in Vermont, and the only statewide one. It’s also open to anyone who lives or works in Vermont. And its slogan is “Better Banking.” Obviously, those are fighting words.

On June 18, it got hit with a cease-and-desist order from Vermont’s banking – err, financial institutions – regulator. After 19 years in office, Thomas Candon, the state’s deputy commissioner of banking and the chief credit union regulator, suddenly decided that credit unions run afoul of Vermont law by using the words bank or banking in their ads. Well, maybe not so suddenly – at least not if you’re counting a lot of grumbling from the Vermont Bankers Association and complaints from some community banks. But since Candon is making an abrupt reinterpretation of a law that’s been on the books since 1969, maybe flip-flop is the right term. Or cowering.  English, after all, is a funny language.

Back in 1969, lawmakers in Montpelier were pretty savvy. They foresaw the day when gangsters would pull into town, set up a storefront called “The Corleone Bank & Trust,” and just walk away with the cash that people thought they were depositing. So they made sure criminals would know that it’s a crime to offer banking services, if you hadn’t gotten the blessing of regulators to do so.

This is what Vermont state law says:

“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 after giving due consideration for whether the activity, word or name will confuse or mislead the public as to the nature of the business of the entity.”

When Candon — himself a former banker — dropped the hammer on VSECU, the order asserted the credit union is not one of the entities that’s allowed to use those words “or any other similar sounding word or name, including but not limited to ‘banking,’ ‘banker,’ ‘banking co-op,’ ‘banking cooperative,’ and ‘not for profit banking cooperative,’ to describe itself, its services, or its activities.” Those terms, said the C-and-D, are “limited to financial institutions,” and using them “is misleading and, at a minimum, significantly blurs the lines between a credit union and a bank and will confuse the public.”

Reading Something Into It

What’s particularly interesting is that, given the plain English of the law, it seems that it’s well within the power of the Vermont Department of Financial Regulation to simply approve this. It just doesn’t want to.

Unfortunately, it also doesn’t suggest what other kind of tortured English the credit union should use, such as:

“Come do your federally-insured depositing with us.”

“We offer better credit unioning than other non-credit unions do.”

“Here, it’s all about better interactive consumer financial transactioning.”

Despite their deafening applause for Vermont regulators, Bay State banks shouldn’t be counting on any such foolishness happening here. Dan Rosenthal, a spokesman for the Massachusetts Division of Banks, says the commonwealth’s banking laws specifically reference credit unions, too. So there aren’t any plans here to use iambic pentameter as a weapon in the war between banks and CUs.

In August, though, the eyes of the industry will be on Vermont, where a hearing is being held on the credit union’s appeal of Candon’s order. The Vermont Bankers Association is involved, and the American Bankers Association is being asked to join in the fray, too. Meanwhile, the Vermont Credit Union Association has also stepped into the melee, and the VSECU has put the issue front and center on its own website, in hopes that rational, voting consumers will pressure the regulator, the governor and lawmakers to knock off this ludicrous interpretation.

Of course, that effort assumes those in charge can read English. Don’t bank on it.

Vincent M. Valvo is CEO of Agility Resources Group LLC. He can be reached at vvalvo@agilityresourcesgroup.com