Because CUSOs are not considered financial institutions, the National Association of Credit Union Service Organizations said they should not be required to disclose certain incentive-based compensation arrangements.
NACUSO’s position has to do with a provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which tasked the NCUA and other federal regulators to prescribe regulations requiring disclosure of certain incentive-based compensation arrangements for executives, directors, employees or principal shareholders of a covered financial institution, including nearly all state and federally chartered credit unions.
The act applies to institutions regulated by federal regulations, wrote NACUSO President/CEO Jack Antonini. Since CUSOs are not regulated by or directly supervised by the NCUA, it is not clear if the proposal should apply to them, he added.
“CUSOs in general are not operating in the same business activities as the covered institutions and most should not be placed at a competitive advantage by being treated as a financial institution when much of their competition is not,” Antonini said.
NACUSO said it is also concerned with the evasion provision of the proposal, which is designed to prevent covered financial institutions from, for example, making substantial numbers of its covered persons independent contractors for the purpose of evading this subpart. Antonini said that since CUSOs are often staffed with former employees of credit unions, it may look as though the credit union is attempting to evade the proposed rule.
“…[B]ut in truth the credit unions are all simply trying to maximize the aggregate expertise of their staff to gain scale and better quality of service. We ask that this provision specify that use of a CUSO to provide services formerly provided by the credit union is not considered evasion.”
NACUSO is asking CUSOs to comment on the proposed rule.