CUSO Reg Comment Letters Are Before the NCUA
Now that the Sept. 26 comment deadline has passed, the NCUA will likely read through the more than 140 letters it has received on its proposal to amend the CUSO rule.
At press time, the majority of the letters were against the proposed amendments to Part 712, which include requiring all CUSOs to file financial reports directly with the NCUA and the appropriate state supervisory authority. The NCUA board has also proposed limiting FISCUs’ aggregate cash outlays to CUSOs.
NCUA Chairman Debbie Matz recently told NAFCU’s Congressional Caucus attendees that the agency is likely to make changes that could exempt CUSOs that perform back-office operations that don’t pose a potential risk to the credit union system.
Both CUNA and NAFCU were among the latest calling for the regulator to revise or withdraw its proposal.
NAFCU said it does not agree with the NCUA previously stated concerns that CUSOs pose a systemic industry-wide risk saying “a very small percentage of credit union assets have been invested in CUSOs, but also because credit unions under current laws and regulations are greatly limited in their ability to invest in CUSOs.”
“To increase the regulatory burden on CUSOs based on a small number of cases is both unnecessary and unfair,” wrote NAFCU President/CEO Fred Becker in a Sept. 23 comment letter. “If the NCUA adopts the proposed rule, the benefits that credit unions and their members receive through their partnership with CUSOs would inevitably decrease, even though the arrangements do not pose undue risk.”
As others have questioned, NAFCU said it does not believe that the NCUA has the legal authority to require CUSOs to submit their financial reports to the agency.
Becker cited December 2010 testimony by Matz before the U.S. Senate Committee on Banking, Housing and Urban Affairs, in which she stated “NCUA is the only regulator subject to the Financial Institutions Reform, Recovery and Enforcement Act of 1989 that does not have authority to perform examinations of vendors which provide services to insured institutions.”
NASCUS also weighed in saying a better approach to evaluating the credit union and CUSO relationship would be to emphasize credit union due diligence as part of the routine examination.
“If during the course of an examination regulators conclude a more detailed review of the CUSO is necessary, then authority already exists at the state and federal level to obtain additional information as needed,” NASCUS wrote in its comment letter.
NASCUS also suggested the NCUA fully exempt state-chartered credit unions in states where the state regulator exercises sufficient CUSO oversight to mitigate material risk and the agency reorganize their rules and regulations to ease regulatory burden by consolidating share insurance rules.
Meanwhile, NACUSO, which had an immediate opposition to the NCUA’s recommendations early on, urged CUSOs and credit unions to continue to send in comment letters up until the last minute.
“We need to tell our side of the story to the NCUA, that their proposed CUSO rules are unnecessary, costly and will likely stifle the innovation,” NACUSO said in an email blast a few days before the comment period deadline.