Bankers Say NCUA Is Unnecessarily Rushing CUSO Rule; Ask for More Time to Comment
The proposed rule would allow CUSOs to originate any type of loan that a federal credit union may originate.
Contending that the process is being “unnecessarily rushed,” the American Bankers Association has called on the NCUA to extend the comment period on the agency’s controversial proposal to allow CUSOs to expand their services.
The comment period is scheduled to end on March 29 and the ABA said the deadline should be extended by another 60 days; the new deadline would be May 28.
“The Proposal is comprehensive and represents a significant expansion of CUSO lending activities,” the ABA said in requesting more time.
In January, the NCUA board approved, 2-1, a proposal that would expand the types of activities that CUSOs can engage in. The proposed rule would allow CUSOs to originate any type of loan that a federal credit union may originate and would provide the agency board with more flexibility in determining the legal activities of CUSOs.
Board Member Todd Harper, who later in January became board chairman, opposed the proposed rule. He said the rule would allow CUSOs to become indirect auto lenders and payday lenders, adding that the NCUA has no authority to supervise the organizations for compliance with consumer protection laws.
“I would like to examine why we are even considering this proposal today. It is certainly not COVID related,” he said. “There is no economic analysis to make the business case for expanding this unfettered lending authority.”
Timothy Keehan, the ABA’s vice president and senior counsel, cited Harper’s opposition in his letter to the NCUA.
He said that regarding another proposal, Harper said that he does not support a 30-day comment period for any recent proposals that pose significant legal and policy issues.
Keehan said that all interested parties must have adequate time to evaluate the proposal and the risks it will impose on consumers, communities and the financial services industry.
Few other comments on the proposed rule have been filed so far.
However, Becky Reed, CEO of Lone Star Credit Union in Texas, endorsed the CUSO rule.
She said that credit unions have been investing in and using CUSOs to help them survive in the modern financial industry.
“Gone are the days that credit unions can sit back and live off their net interest margin,” she wrote. “The financial services landscape is much too competitive for that luxury. Credit unions must innovate to thrive.”
She wrote that there is no evidence that the extension of the types of lending that CUSOs may do will hurt the industry or the Share Insurance Fund.
“It is very important that CUSOs be able to originate loans of any type that credit unions can originate for their members,” she wrote. “There are already companies looking for credit union partners that originate solar loans, renovation loans, boat and airplane loans, etc.”
She added that the rule would allow credit unions to form CUSOs to compete with a private lender that is taking advantage of its customers.