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On Monday, the NCUA issued a Letter to Credit Unions to remind that of a final rule that went into effect more than a year ago that amended the agency's regulation part 712 dealing with CUSOs. The rule expanded the "list of permissible activities and services for CUSOs to include originating any type of loan that a federal credit union may originate and grants the Board additional flexibility to approve permissible activities and services."
The Letter, signed by NCUA Board Chairman Todd Harper, stated, "Given the new rule has been in effect for more than a year now, the agency has produced the enclosed guidance statement to remind credit unions of the expanded opportunities to work with CUSOs and to address some of the primary related risks. Based on a credit union's relationship with a CUSO, whether sole owner, investor, lender or customer, the level and types of risk may vary. Credit unions also need to remain mindful of and properly address any consumer financial protection risks that CUSO-originated loans pose."
Also on Monday, the NCUA updated a "Guidance Statement – Expansion of Permissible CUSO Activities and Associated Risks" on its website.
According to the Guidance Statement, credit unions may participate or engage with a CUSO in one or more of the following relationships:
1. Lender – A credit union that lends funds to a CUSO, creating a debt relationship.
2. Investor or owner – A credit union that invests in a CUSO. The credit union may own all or a portion of the CUSO, establishing an equity relationship. Depending on the structure of the relationship, the credit union may be a shareholder, member or partner.
3. Client or customer – A credit union that uses a CUSO's services, or purchases products, including loans offered by a CUSO, constituting a vendor-client relationship.
The NCUA addressed some risk factors in the Guidance Statement that credit unions may be exposed to, depending on its relationship to the CUSO. The risk areas include:
- Credit Risk
- Strategic Risk
- Compliance Risk – Applicable Laws and Regulations
- Fair Lending
- Unfair, Deceptive, or Abusive Acts and Practices
- Reputation Risk
The NCUA asked credit union leaders to seek out additional guidance on managing any CUSO relationships by reviewing the Examiners Guide.
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Michael Ogden
Editor-in-Chief at CU Times. To connect, email at [email protected]. As Editor-in-Chief of CU Times since 2016, Michael Ogden has led the editorial team in all aspects of content strategy and execution, including the creation of the publication’s exclusive and proprietary research database of the credit union industry’s economic landscape. Under Michael’s leadership, CU Times has successfully shifted to an all-digital editorial product with new focuses on the payments, fraud, lending and regulatory beats. Most recently, he introduced a data-focused editorial product for subscribers that breaks down credit union issues into hard data, allowing for a deeper and more factual narrative for readers. In 2024, he launched the "Shared Accounts With CU Times" podcast, which offers a fresh, inside-the-newsroom perspective through interviews with leaders from the credit union industry and the regulatory world. He dives into pressing credit union issues, while revealing the personalities working behind-the-scenes to push the credit union world forward. His background includes years as a radio and TV anchor/reporter and a public relations and digital/social media manager, where he covered the food and music industries, as well as cooperatives and credit unions. Over the years, he has launched numerous exclusive video and podcast series, including a successful series of interactive backstage interviews with musicians at music festivals, showcasing his social media and live streaming production skills.
