The Texas Credit Union Commission recently addressed severalmatters regarding investments in credit union service organizationsin the Lone Star State.

At its June 16 and 17 meetings, Commissioner Harold Feeney said the proposed amendments clarifythat a CUSO must comply with all applicable state or federallicensing requirements. In addition, the proposed amendments wouldincrease the time from 15 days to 20 days to notify thecommissioner of certain CUSO activities and impose a newrequirement that Texas Credit Union Department must approve anyinvestment that would cause the aggregate investment in CUSOs toexceed 25% of the credit union's net worth.

Under the proposal, the commissioner may also order thedivesture of a CUSO investment or loan upon finding that the creditunion is not in compliance with the CUSO rule and if it presents asafety and soundness issue. Commission Member Allyson Morrow movedto recommend that the commission approve for publication andcomment the proposed amendments to 7 TAC Section 91.801.CommissionMember Manuel Cavazos seconded the motion and it was unanimouslyadopted, according to the June 16 meeting's minutes.

Commission Member Gary Tuma asked about an example of whatconstitutes a “material change in the ownership interest” undersubsection (c)(1) of the proposal. Feeney indicated that “materialchange” was existing language. However, the proposal seeks tosubstitute “ownership interest” for “organizational structure” toclarify what type of change is important to the department inevaluating any enhanced risk presented before a credit unioninitiates a significant change.

Feeney noted that there is no precise definition of the term“material,” but it is generally interpreted as a change that issignificant and could have a noticeable impact on the currentsituation. He further explained that materiality is “fact-specificas to a given circumstance but, in general, it would be a changewhich is important in terms of the size of the investment, itsvalue or rights to manage or control the CUSO.”

Tuma also questioned if there was a specified timetable forresponding to a request for approval under subsection (e) of theproposal. Feeney indicated that legislature has established in thestate's finance code that an application must be approved or deniedwithin 60 days. He noted that the same guidelines would apply tothis type of application. The motion was passed unanimously,according to the commission meeting's minutes.

In a May 24 comment letter, NACUSO said it was uncertain of thefull implications of the proposal asking will CUSOs have the samepowers and limitations of credit unions and requesting clarity onwhat the term “limitations” means.

“If the intent is to subject CUSOs to the same regulatoryrestrictions and supervisory authority as those facing creditunions, this is a serious departure from the current powers inevery other state that regulates credit unions and the federalauthority of the NCUA,” NACUSO President/CEO Jack Antoniniwrote.

The Texas Credit Union League had also taken issue with theproposal saying it appears to be a conflict between existingregulations in the Texas Credit Union Act and other laws CUSOs maybe subject to. Regarding the commission's June meeting, the leaguesaid it is pleased so far.

“We wrote our comment call based on a much earlier draft of theCUSO rule as it came out,” said Winter Prosapio, TCUL assistantvice president of public affairs. “At this point we feel the greatdeal of the concerns that we raised were addressed in the revisionand we're still gathering information from credit unions to see ifthey're still an existing concerns regarding the rule.”