Building Bridges Between CUSOs, Credit Unions Continue to Pose Challenges, New Model Aims to Protect All
NEWPORT BEACH, Calif. -- As the number of relationships with CUSOs continues to grow, the provider agreement between the two may sometimes be incomplete or worse, not outline key elements that protect credit unions should certain disagreements arise.
With the myriad of responsibilities and squeezed time that management has, the lack of attention to contractual details can result in situations where the credit union "is caught off guard" and cannot take the action it desires due to a deficiency in a service provider contract, said Guy Messick, general counsel for NACUSO and head of Messick & Weber, P.C., a law firm that assists credit unions.
Enter the role of the strategic provider manager. This person would be involved in the service provider selection process, contract negotiation, the implementation process and the monitoring process. The SPM would also meet with the service provider periodically to review the relationship and what steps can be taken to improve the relationship, Messick said. The use of performance standards and relationship monitoring are essential tools for the credit union management to access the success of a service provider relationship.
"Credit unions should have staff that are liaisons to the CUSOs and are informed as to the services and products being provided by the CUSO so that the credit union board and regulator know that the credit union has not just handed over the keys to the car to the CUSO," Messick said. "The credit union should at least be a passenger in the car and can monitor the CUSO's driving."
Selecting the "right" service provider is approached differently by credit unions. The SPM's role could work with the "specialized knowledge staff," which are experts from a specific department within a credit union, to help make the selection. These experts ideally would have an established performance criteria and the knowledge to evaluate the ability of the candidates to meet the standards, Messick said.
"One of the key functions of an SPM would be to network with industry colleagues to gain a knowledge base for the credit union to draw upon for options to meet its service needs," Messick said. "If this is someone's dedicated job, think how much easier it will be for senior management to select a service provider who will best serve the needs of the credit union."
Messick said other advantages are senior managers won't "have to feel like pathfinders for every new service that is considered" and the time from conception to market might be greatly compressed.
The SPM is one piece of NACUSO's bigger effort to build on the momentum of integrating credit union and CUSO activities, said Tom Davis, president/CEO of NACUSO. It continues to be a struggle for most and barriers still exist, he added.
"It's kind of 'we' and 'they' as opposed to 'us,'" Davis said. "Not all the time, but CUSOs sometimes get treated as distant stepsisters. The whole issue around the strategic partner manager is how do we integrate the CUSO and credit union."
The SPM's role would fall under the creation of a chief integration officer, Davis explained. This person would ensure that integration is happening across all lines. The CIO would probably meet more often in the beginning with the appropriate persons and then perhaps for three hours once a month to address any trouble spots. Looking at a credit union's organizational chart, at the top would be the board of directors, then the CEO with the CIO reporting to the CEO. The key strategies might be market expansion and growth, strategic positioning, professional development of employees and operations excellence, Davis said. The traditional departments including investments, human resources, lending and information technology would fall under those four strategies.
"I don't think we are adequately aligned to support strategy," Davis said. "[Credit unions] in the U.S. have existed for nearly 100 years and quite frankly, we have the same structure. Of course, we've grown bigger and introduced management teams. Many credit unions are organized to oversee functions but when you structure yourselves like this, you have integration programs."
Davis said AT&T Canada is currently working on a similar integration model. A few CUSOs are prepping to beta test the model, he added. Messick said NACUSO would like to continue dialogues with NCUA on finding out what the regional directors are looking for from CUSOs and credit unions as the two entities meet in the middle.
"NCUA is supportive of CUSOs and collaboration but is concerned about any operational service credit unions do not monitor," said Messick, emphasizing that NACUSO intends to work with the regulator, CUSOs and credit unions to develop best practices. "We as an industry have to understand that if we change the way we operate by aggregating services, we need to change the way we assess and monitor the risks."