When the NCUA issues its proposed regulation of credit union service organizations on July 21, it will be an attempt by the agency to keep a closer eye on organizations whose role has grown and therefore expose credit unions to greater risk.

According to sources, the agency plans to propose a rule that includes further limiting investments for a credit union deemed undercapitalized, a requirement that CUSOs file financial reports with the NCUA and state regulators, and a requirement that credit unions do greater due diligence before deciding to purchase loans through a CUSO.

In her June 30 speech at NAFCU's annual conference, NCUA Chairman Debbie Matz explained that CUSOs "provide many important services to their members. But many of the processes that go through CUSOs–originating speculative business loans, steering subprime indirect auto loans and selling risky loans to other credit unions–expose credit unions to undue risk."