People like to be happy and they like to save money. But advertising your credit union as an online bank called “Happysavings”?
Some people most certainly do not like that – least of all the Canadian financial regulators who view this name game as a “fiction” aimed at deceiving savers and funding unsound banking practices.
As a result, the story of Happysavings isn’t all that happy, though it does offer a window into the lengths some guys will go to lure customers in a low-rate environment.
The nasty business starts in mid-November, when Sunova Credit Union of Selkirk, Manitoba, decides it wants to grab more deposits, which will fund more profit-growing loans. It chooses to do this by creating two new brand names, Hubert Financial and Happysavings.ca, for the sake of offering deposits over the Internet at the lavish rate of 2.25%.
“Hubert’s Happy Savings Account will keep you smiling, as our high interest rate will help your savings grow while still giving you full access to your funds,” Hubert’s web site instructs.
Sunova then buys ads in papers and on the airwaves all over Canada, including in the neighboring province of Saskatchewan and, somewhat more suspiciously, the not so neighboring one of Nova Scotia.
But buying local ads in other provinces is prohibited under credit union rules, as is advertising without full disclosure of who is actually doing the advertising. That’s in part because the provinces want to protect their own credit unions, and in part because regulators are always on the lookout for new scams to separate people from their savings (get any emails lately from Nigerian government officials?).
So a regulator in, say Regina, Saskatchewan, looking up an exciting new offer from the unheard-of Happysavings would find himself surprised indeed to find it was backed by something else he’d never heard of, Hubert Financial. And then surprised again to find the whole thing was being run out of Selkirk, a suburb of Winnipeg.
As a result, the Happysavings offer didn’t actually keep the financial institutions regulators in Saskatchewan and Nova Scotia smiling. To the contrary, it provoked them to do something they don’t do all that often – mail out cease-and-desist orders.
“Happysavings was a terrific gimmick,” said Jim Hall, the registrar of credit unions at the Saskatchewan Financial Services Commission. “It was brilliant. Unfortunately it wasn’t lawful.”
That is unfortunate, though Sunova seems to be chalking it up to nothing ventured, nothing gained. The credit union — which says in its annual report that it has 32 million Canadian dollars of capital and C$587 million in assets – says Happysavings has 47 members so far with just under a million in deposits.
Marketing director Vanessa Foster stresses that Sunova has learned its lesson. New ads for Happysavings will make clear that it is a part of Sunova, and won’t be pitched in other provinces, where Sunova is prohibited from advertising.
These changes will address the problems Hall and his colleagues in Canadian regulatory circles saw with the initial ads. They viewed that campaign as a bid to grab customer funds without adequate disclosure about who would be holding the money and where.
“You have to know where your money is going,” said Hall. “We like to see consumers aware of who they’re depositing with, because there are so many opportunities, if you will, to lose your money.”
Oh, and there’s one other thing. Along with all the other problems they spotted in the early Happysavings ads – the one that led U.S. watchdogs at the Federal Deposit Insurance Corp. to circulate a notice this week saying Hubert and Happysavings “may be illegally operating as financial institutions” — regulators didn’t like the fact that one ad referred to the credit union behind the stage names as a bank.
Canadian law says that’s a no-no. So Sunova won’t be doing that anymore, either, though you get the feeling execs there aren’t sure why they have to jump through all these hoops.
“That was a little bit of an ordeal,” Foster said. “But some of these guidelines were put in place before the Internet was even around.”