LAS VEGAS — The regulatory landscape for CUSOs has been much more active as of late with third-party relationships coming under review.
In addition to providing a session on CUSO 101, Guy Messick, general counsel for NACUSO, along with Brian Lauer, associate at Messick & Weber P.C., honed in on current regulatory topics. In a discussion relating to NCUA's Evaluating Third-party Relationships Letter 07-CU-13, December 2007, Messick focused on credit union third-party relationships as part of his NCUA regulatory update.
"The NCUA letter seeks to ensure that all parties understand their risks and roles of responsibility," Messick said. "Credit unions need someone who oversees all third-party relationships to insure consistency across all products and service lines in monitoring and managing third-party relationships. Often, credit unions may not realize how dependent they are on third-party relationships."
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Messick said one credit union told him it counted over 200 third-party relationships.
"We have to understand that a credit union that depends upon 200 third-party relationships has to have an organization structure and risk management protocols that are different than a credit union that has an internal staff providing all the key operational services," Messick said.
Messick also directed attention to regulatory action on sharing information between the credit union and CUSO, Fair and Accurate Credit Transactions Act relating to the privacy and use of credit union member data with third parties. Compliance goes into effect Oct. 1, 2008, and is one of three key privacy laws governing the sharing of member information between a credit union and a CUSO, he said. The Gramm-Leach-Bliley Act (NCUA Part 716, FTC Part 313) and the Fair Credit Reporting Act being the other two laws, Messick added.
During the CUSO 101 session, Messick and Lauer discussed the strategic uses of CUSOs, when to use CUSOs and when to use incidental powers. The CUSO formation process, normal organizational structure and the relationship between the credit union owners and the CUSO were also presented, along with examples of CUSO services that are heating up, such as youth marketing, disaster recovery/business continuity, and investment advisory services.
"For example, regulators are recognizing that CUSOs are the future of credit unions. In order to properly evaluate the CUSOs, we have to create a new model in the credit union industry, whereby credit unions not only provide the services, but we must also monitor the services," Messick said. "Credit unions can't just hand over the keys of your operational services to third parties, including CUSOs, without monitoring them."
Messick said NACUSO is helping credit unions and CUSOs develop a means for ensuring the proper evaluations are in place to move the credit union industry forward.
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