As Jack Antonini approaches the one-year mark since taking thehelm at the National Association of Credit Union ServicesOrganizations, the former bank CEO marveled at the number ofcollaborations CUSOs frequently engage in.

One thing he was not expecting to see was how competitive CUSOscan be.

That was one of the revelations Antonini offered when askedabout the dynamics of CUSO relationships. Looking back on hiseight months of service as NACUSO's president/CEO, shared otherpersonal insights on the ever-changing landscape of CUSO structuresand innovation. Credit Union Times recently asked him to talk aboutsome of the industry's most pressing issues.

Michelle A. Samaad: From your vantage point,how would you assess the state of the CUSO industry? 

Jack Antonini: It is becoming more evident thatCUSOs are essential to the sustainability of credit unions. CUSOsprovide financial services that earn much needed income for creditunions while providing valuable services for members. CUSOs provideoperational services that save the credit union industry millionsof dollars and raise the level of expertise available to creditunions. The number and the role of CUSOs are growing even while thenumber of credit unions shrinks. So overall, I would say the stateof the CUSO industry is strong, and the CUSOs I've talked to aredoing well, providing valuable services and income that theirowners and customers need.

Samaad: CUSOs are known for being innovators.Regulatory compliance appears to among the fastest growingCUSO upstarts. What are some of the latest innovations you'rehearing about? 

Antonini: Probably the latest CUSO innovationsthat I've heard about are related to bringing cloud computing tothe credit union industry and filling some of the gaps left by thedownsizing of corporate credit unions. For example, CUSOs are beingformed to provide warehouse lending to mortgage CUSOs which waspreviously provided by corporate credit unions. CUSOs are providingexpertise in specialized lending, e.g. student loans and time shareloans. CUSOs are also being developed to share excess staffcapacity among credit unions.

Samaad: What do you consider to be among thebiggest threats to CUSOs? 

Antonini: Proposed NCUA regulation of CUSOs has to be at the top of thelist. Requiring audits and a formal approval processes to obtainapproval to try a new innovative idea will stifle creativity andinnovation, and add costs to organizations that are designed tosave the industry money. We certainly don't want to see CUSOs at acompetitive disadvantage to unregulated third party ownedcompetitors, simply because they are not owned by credit unions andnot under NCUA scrutiny.

Samaad: As you know, the NCUA has amped up itsefforts to scrutinize CUSOs, some say as a result of those CUSOrelationships that led to business and commercial lending lossesfor their credit union owners and partners–what are your thoughtson the NCUA's intentions? 

Antonini: Since the NCUA chairman has argued infavor of lifting the member business lending cap, which we atNACUSO wholeheartedly agree with, it's hard to imagine that somebusiness loan losses that may have originated in CUSOs could be thereason for claiming CUSOs pose a “systemic risk to the insurancefund,” especially when the total aggregate amount invested in orloaned to CUSOs is only 22 basis points of industry assets. TheNCUA already has effective authority over CUSOs today. NCUA canexamine the books and records of a CUSO and if there is an issue ofsafety and soundness, they can direct the owner credit unions toremedy the issue, limit future investment or require divestiture.Financial services that are licensed with the Securities ExchangeCommission and/or state insurance commissioners already haveregulatory oversight to protect members as well as the CUSO's ownercredit unions. NACUSO's position is that there is no demonstratedsystematic risk by CUSOs to the credit union industry, and to theextent such risk exists, or could develop in the future, theregulators have the tools to protect the safety and soundness ofthe industry if the tools are diligently used. The harm to theindustry by regulating CUSOs will be to stifle the innovation andcollaboration which is necessary for the credit union industry tore-invent itself to remain viable in these troubled economictimes.

Samaad: NACUSO recentlypenned a comment letter to the Texas Credit Union Departmentconcerned that a proposal submitted would limit CUSO powers in thatstate. In the May 24, letter, you asked if CUSOs would become “mereshadows of credit unions” since the proposal seeks to apply thesame rules to both credit unions and CUSO activities. Where do yousee the danger here? 

Antonini: The danger in that specificregulatory proposal by the Texas Credit Union Department was thebroad language that would limit CUSOs to only those activities thatare authorized for credit unions in the state of Texas withoutconsideration of the broader role that CUSOs have played in helpingcredit unions serve their members, including providing property andcasualty insurance, investment services and other services that arenot specifically authorized for credit unions to provide.

Samaad: In certain parts of the country, thereare proliferations of CUSOs that offer the same types of services.Do you feel this creates unnecessary saturation within respectivemarkets or is the number of CUSOs within a certain geographicboundary irrelevant? 

Antonini: Personally, it would be ideal if wecould combine the duplicative CUSOs into one more efficient CUSOthat all the users would benefit from, but one of the things wevalue as Americans is choice and that includes which CUSO a creditunion chooses to use for certain products or services. The ownersof the CUSOs are certainly able to consider merging their CUSOs ifthat makes more economic sense than continuing to provide similarservices in overlapping geographic markets. Most industries gothrough expansion and consolidation cycles. Just as credit unionsare consolidating for economic reasons, I expect that there will beconsolidation of some CUSOs in order to achieve greater scale.However, I do believe we will continue to see new CUSOs beingformed for new and innovative purposes.

Samaad: Since taking the helm last Decemberwhat have you've learned about the dynamics of CUSOrelationships? 

Antonini: They are more complex and morecompetitive than I expected coming in to the industry. There aregreat examples of collaboration, but there is also a lot ofcompetition. The good news is that credit unions have plenty ofchoices. 

Samaad: Looking ahead, how do you see the CUSOindustry evolving? 

Antonini: I hope to see more collaboration andmore innovation, and more credit unions asking for creativesolutions from CUSOs to problems and challenges they have. A lot ofthat depends on how the economy does, whether the industry workstogether to increase consumer awareness of the wonderful creditunion alternative to high priced banking, particularly amongyounger consumers, and that means embracing and utilizing newtechnologies and social networks, that for the younger prospectivemembers are second nature. I could definitely see a place for aCUSO just focused on helping credit unions attract younger members,advising them on what channels to use, how to communicateeffectively and efficiently, etc.