Texas Regulator’s CUSO Powers Proposal Comes Under Fire
A Texas proposal that calls for changes in the powers and regulation of credit union service organizations in the Lone Star State is under scrutiny.
At issue is a subsection in a proposal from the Texas Credit Union Commission within the Credit Union Department-State of Texas that reads, “All legal limitations imposed on a credit union by Texas Finance Code, Title 3, Subtitle D and any rules adopted under that Subtitle, apply equally to CUSO activities.”
Under the proposal, the commissioner may limit or refuse to permit any CUSO activity or service based upon supervisory, legal or safety and soundness reasons.
In a May 24 comment letter, the National Association of Credit Union Service Organizations said it is uncertain of the full implications of the proposal, asks if CUSOs will have the same powers and limitations of credit unions, and requests clarity on what the term “limitations” means.
“If the intent is to subject CUSOs to the same regulatory restrictions and supervisory authority as those facing credit unions, this is a serious departure from the current powers in every other state that regulates credit unions and the federal authority of the NCUA,” NACUSO wrote.
There is no jurisdiction in the United States that restricts CUSOs to those permissible activities only credit unions are permitted to perform, according to NACUSO, adding the NCUA does not have regulatory authority over CUSOs but has expressed a desire to petition Congress for that authority.
NACUSO also expressed concern with a proposed rule that would require prior written approval from the Texas commission for any proposed investment or loan to a CUSO that will cause the total aggregate investments in, and loans to, that CUSO to exceed 15% of the credit union’s net worth.
“By statute and rule, investment limitations in any one CUSO of no more than the lesser of 5% of assets or its reserves and undivided earnings and of an aggregate of investments and loans to all CUSOs not being able to exceed 10% of unconsolidated assets seem sufficient without additional limitations which might result in some CUSOs being stalemated for investment dollars and/or borrowing authorization,” NACUSO wrote.
The Texas CU Commission has also proposed a 20-day notice if the CUSO makes a material change in its organizational structure or performs a new activity. NACUSO said more clarity is needed on what changes would apply.
NACUSO said it coordinated with the Texas Credit Union League and the Credit Union Coalition in its comment letter.