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Canadian Credit Unions can no Longer call themselves Banks

Monday, July 24, 2017

Be ready for an overhaul! There are some unprecedented changes coming in the vocabulary that credit unions can use.

In Canada, the language used by financial institutions is regulated by the Office of the Superintendent of Financial Institutions (OSFI), which has decided to restrict the use of the word “bank” and its derivatives by non-bank financial institutions because of pressure from the Canadian Bankers Association.

Understanding the recent OSFI legislation on language

  • What is the difference between a credit union and a bank? Until recently, credit unions were largely local institutions under provincial jurisdiction. They are now moving onto the federal stage, however, which will help them answer some of the principal complaints levelled against them: that they lag behind banks in service area, have restrictive membership and have fewer branches. Credit unions are cooperatives and non-profit, which is what really sets them apart from big banks. Being non-profit often means lower interest rates on loans and credit cards, lower bank fees and higher interest rates paid on accounts. Over one third of Canadians are members of a credit union.
  • OSFI’s rationale behind the language legislation. OSFI states that restrictions are being imposed because of an increase in usage of words like “bank,” “banker”, and “banking” by non-bank financial institutions. It wants to ensure that consumers are not misled into thinking they are dealing with a federally regulated and insured bank when, in fact, they may not be.
  • Non-bank financial institutions have been ordered to remove “bank” and its derivatives from their websites by the end of 2017; from printed material by the end of June 2018 and from all signage by June 30, 2019.
  • It is expected to cost credit unions in Canada tens of millions of dollars to make all the changes mandated by the OSFI.

If you have any questions about banks and credit unions, contact us at Abakhan & Associates!

Or if you are facing financial difficulties, call us at Abakhan & Associates to book a free initial consultation with a Licensed Insolvency Trustee in Vancouver. With several offices in the Lower Mainland, you are never far away from one of our Trustees and debt management in Vancouver.

Contact one of our licensed insolvency and bankruptcy trustees in Vancouver today for a free consultation!

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