Canada's 278 credit unions got a reprieve of sorts last week from a government advisory that would ban their use of the B-words —- banks, banker and banking.

Canada's Department of Finance in Ottawa said on Aug. 11 that it is reviewing an advisory issued in June by the Office of the Superintendent of Financial Institutions that would have also authorized the federal government to bring criminal charges against any credit union that uses the banned B-words.

Credit unions across Canada sharply criticized the proposal. The Canadian Credit Union Association said the OSFI took a position that is inconsistent with its past practices and with common sense. The trade association pointed out credit unions have used the B-words for years without penalty.

The advisory would require Canadian credit unions to remove the words bank, banking and banker from their websites and social media sites by the end of this year. By June 30, 2018, credit unions would no longer be allowed to use the B-words on any print materials and by June 30, 2019, they would no longer be allowed to use the B-words on any signs.

“We are pleased that the federal government has recognized the need for a common-sense review of this issue,” Martha Durdin, CCUA president/CEO, said.  “Credit unions provide banking services to millions of Canadians and need to speak to them in a way they can understand.”

In its consultation paper, the Department of Finance noted it is important that consumers know when they are dealing with a bank, rather than another type of financial service provider because banks are subject to protection and obligations that were created by the federal banking framework.

“For this reason, the (Canada) Bank Act limits the use of the terms “bank,” “banker,” and “banking” to banks only,” the Department of Finance said its consultation paper.

In June, however, the OSFI said it issued the advisory because there has been an increased use of the B-words by non-bank financial service providers.

In addition to provincial credit unions, which the Canadian government does not recognize as banks, the OSFI advisory also would include trust and loan companies, securities dealers and brokers and fintechs from using the B-words.

But Canadian government officials apparently got an earful of comments from credit unions since the proposed B-word ban was announced.

“Credit unions have indicated they do not want to contravene the Bank Act, but they believe they would be competitively disadvantaged unless they are allowed to use the banking related terms to describe their business activities,” the Department of Finance said.

However, the government agency also noted that credit unions recognize that limits on the use of the B-words are required so that there is appropriate disclosure to consumers that would mitigate marketplace confusion. For example, if a credit union used the B-words in a brochure, it would also include a prominent disclosure that the credit union is not a bank.

The Department of Finance said it is seeking views on whether credit unions and other non-bank deposit taking organizations should be given the flexibility to use the B-words.

“Feedback is welcomed on how to refine the limitations on the use of these terms and on how to avoid marketplace confusion and ensure the appropriate protection of consumers,” the Department of Finance said.

The OSFI did not say when it would make a final ruling.