CUSOs Brace for Wave of Regs
LAS VEGAS -- Where do CUSOs fit as credit unions wonder if the legislative and regulative worlds are "spinning in sync?"
It was the question posed by Dennis Dollar, former NCUA board chairman and principal partner of Dollar Associates LLC, at an April 26 afternoon session during NACUSO's annual conference. Dollar gave an overview of what credit unions may expect going forward in a number of areas including the corporate credit union restructuring, mergers and financial reform.
Dollar said he is "convinced CUSOs are the wave of the future," especially among larger credit unions. The same may be true for smaller credit unions "if they're not afraid to collaborate with larger ones." It remains to be seen since the industry is in rehab after undergoing surgery last year, he explained.
"The day of 1% [return on assets] is over. Most productive credit unions are getting return from CUSOs," Dollar said.
Fifteen percent of credit unions are engaged in business lending. Of those, roughly 6% invest in CUSOs, Dollar noted. He made that point to show that those credit unions that are invested in CUSOs now "are pretty much the same ones that will be invested in five years." He does expect the ones least likely to invest are those with a CAMEL 1 or 2.
Meanwhile, the growth of community charters fueled CUSO growth, Dollar said. Looking ahead, CUSOs may continue to a viable income source as credit unions grapple with ways to generate fee income. In the member business lending realm, Dollar said some are on the fence on whether the 12.25% of assets cap should be expanded. Some CUSOs want the cap to stay put because it may mean more business from credit unions especially since the if the threshold is lifted, it is likely that more regulations will be enacted."
Dollar said he believes the 1% investment in CUSO rule needs to be raised but acknowledged that many are not currently bumping up against it. Even as the NCUA does not regulate CUSOs, he believes the possibility is not that far-fetched.
"I don't agree with it. I think it would be a watering down of NCUA's authority. CUSOs have everything they want. I think NCUA should be regulating credit unions."