The NCUA Board said it was also concerned that less than adequately capitalized federally insured state credit unions posed serious risk to their members and the NCUSIF when investing money into failing CUSOs. To address the concern, the regulator proposed limiting these FISCUs' aggregate cash outlays to a CUSO, consistent with state laws.

NACUSO has said that it does not believe the NCUA has the authority to regulate CUSOs.

Messick said with a three-person board, it only takes two board members to approve a new regulation, so NACUSO wanted to make sure that Metsger was well informed of the association's position.

During the meetings with Metsger, NACUSO said there are ways to gather accurate information about CUSOs without regulating them. As a condition of investment, CUSOs can be required to fill out an information sheet providing its name, investors and services, Messick explained.

NCUA can then determine which CUSOs represent a higher risk and monitor them, he suggested, adding, the regulator already talks directly to CUSOs in the review process so additional powers are not needed.

“The real issue to NCUA is the inefficiency of 'going through credit unions' to review CUSOs,” Messick said. “They want to go straight to CUSOs as their regulator. If they rely upon credit unions reporting information on CUSOs, credit unions are not always accurate.”

Antonini, Messick and Zook emphasized that it is important that the review of CUSOs be part of the examination of credit unions which protects against the disclosure of confidential information under the Freedom of Information Act.

Finally, NACUSO said, it counseled against opening up the Federal Credit Union Act for the purpose of NCUA obtaining vendor examination authority.

“Once Pandora's Box is open you do not know what damage the bank lobbyist could do,” Messick said.