LINCOLN, Neb. -
After years of fighting over whether a state-chartered credit union can use the terms "bank" and "banking," credit unions here have scored a victory over the banks, winning the right to use those terms now that the Nebraska Attorney General's office has issued an opinion on the matter. Though federal law allows for credit unions to use these terms, Nebraska law did not. "The Nebraska Bankers Association (NBA) for many years has said that credit unions should not be allowed to use the term 'bank,'" explained Nebraska CU League Governmental Affairs Director Brandon Luetkenhaus, noting that state law prohibits entities that aren't federally insured banks from using the word. It does list a number of exceptions, but credit unions weren't among them.
In fact, the state regulator had issued cease-and-desist orders to several CUs that had been using the terms in their marketing materials.
The league had tried to rectify the conflict by pushing for legislation to include credit unions as one of the entities exempted from the prohibition on the word "bank," but the NBA successfully fought those bills.
Yet those attempts at a legislative fix brought the matter back to the attention of the Nebraska Department of Banking and Finance, which decided to bring the matter to the state attorney general.
The league contended that as federally chartered credit unions in Nebraska have the ability to use the term "banking" to describe a business activity based on NCUA regulations, state charters should also be given that right in order to maintain parity between the two charters.
Moreover, Luetkenhaus explained, the league argued that the federal statutes preempt the state statutes governing the use of the "B" word.
In its legal opinion, the attorney general's office determined that the federal statues do preempt the state statutes, and therefore state-chartered credit unions should be able to use the term "bank" just as its federally chartered brethren do.
"We have talked with the Department of Banking and Finance, and they agree with our interpretation of the attorney general's opinion," Luetkenhaus related. "They will no longer bar credit unions from using the term 'bank.' We are also asking them to lift the cease and desist orders they had issued on several credit unions."
