NEWPORT BEACH, Calif. — One sign that CUSOs can be a viable solution for credit unions wanting to gain more muscle in an increasingly competitive marketplace recently came through NCUA's proposal to include two new services for the entities to offer.
At the April 17 board meeting, NCUA unanimously approved proposed changes to the CUSO rule for public comment. The proposal would add two new permissible CUSO activity categories–credit card loan origination and payroll processing services–and broaden the reach of two service categories to include those eligible for credit union membership, and add new examples of permissible CUSO activities.
"Overall, it's a very positive proposal," said Guy Messick, general counsel for NACUSO. "NCUA has acknowledged how important CUSOs are to enable credit unions to better compete in the financial marketplace. We're very happy that the powers of CUSOs are expanding rather than constricting."
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Messick said NACUSO has been a long-time advocate of expanding CUSO powers. Responding to a question from NCUA in the fall of 2005 on whether federally insured state-chartered credit unions should follow the same CUSO structural, accounting, audits, NCUA access and corporate separateness as required for federal credit unions, Messick told the regulator that NCUA guidelines are generally already followed.
Messick added that "homogenizing CUSOs…[runs] the risk of stripping the ability of CUSOs to innovate under different regulatory schemes at a time when the credit union industry sorely needs innovation to compete in the financial marketplace."
Meanwhile, one CUSO proposal is not sitting well with CUNA (see story on page XX). NCUA is seeking comment on an amendment to Part 741 that would extend federal regulators' access to federally insured, state chartered credit unions to ensure that regulators have access to books and records.
Messick said while he has heard from NCUA that there have been some safety and soundness issues with CUSOs at state-chartered credit unions that have affected federal credit unions, it remains to be seen how big of a problem it is. Through his credit union law firm, Messick said he has not heard of any issues on this matter.
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