The Texas Credit Union League has voiced its concerns with proposed changes regarding the regulation of the state’s credit union service organizations.
The proposal from the Texas Credit Union Department seeks the same legal limits on credit unions to be extended to CUSOs.
One provision would require prior written approval from the Texas Credit Union 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.
The commission has also proposed a 20-day notice if a CUSO makes a material change in its organizational structure or performs a new activity.
The league says the proposal appears to be a conflict between regulations in the Texas Credit Union Act and other laws CUSOs may be subject to.
Jeff Huffman, TCUL vice president of government relations, said one example of how applying all provisions in the Credit Union Act on a CUSO may be problematic is in the case of one owning an insurance operation. Given the insurance agency has a different purpose and powers than a credit union, applying everything in the act may prove challenging, he offered.
“To TCUL's knowledge, most CUSOs are well run. If there are issues the regulator has with a credit unions’ investment in a CUSO, we feel the changes to the regulation should be narrowly drawn to address the specific concerns,” Huffman wrote in a May 27 comment letter.
Based on feedback, members of the Texas league have raised a long list of concerns about the proposal, including whether the state’s credit union department will attack or shut down member business lending CUSOs, according to Huffman.
The Texas state charter also would likely be disadvantaged in comparison to the federal charter and other state charters regarding operating a CUSO if the proposal is adopted, the league said.
Huffman said the league suggested that as an alternative to moving forward with the proposed draft regulation, an advisory group be convened instead to work through the concerns of the Texas Credit Union Department’s staff regarding CUSOs.
The National Association of Credit Union Service Organizations has also expressed its concerns with the proposal.