CUSO Reg Comment Letters Swamp NCUA
The NCUA will likely have much to consider as it reads through more than 280 comment letters that came in on the agency’s proposal to amend the CUSO rule.
“The [board] hasn’t decided one way or the other what it wants to do with the proposed CUSO rule amendments. Currently, it is taking the comment letters under advisement,” David Small, NCUA spokesman and assistant director of public affairs, told Credit Union Times in an email statement.
Small said most of the 280 comment letters are duplicative “with the same verbiage signed by different people.”
In July, the NCUA proposed a rule that would require all CUSOs to file financial reports directly with NCUA and the appropriate state supervisory authority. The regulator also proposed making additional parts of the CUSO rule applicable to federally insured state-chartered credit unions as well as federal credit unions.
The NCUA board said it was also concerned that less than adequately capitalized FISCUs posed serious risk to their members and the NCUSIF when investing money into failing CUSOs. To address the concern, the regulator proposed limiting these FISCUs’ aggregate cash outlays to a CUSO, consistent with state laws.
Credit Union Times previously learned that NCUA Staff Attorney Christie Loizos told attendees at NACUSO’s recent Business Services Connection in San Diego that because of the large amount of comment letters to read through, a decision on the CUSO proposal would likely not come until after the first of the year.
Meanwhile, the National Consumer Law Center continued its criticism of payday lending in its letter to the NCUA.
“We are particularly concerned about a very small number of CUSOs (and credit unions) that are engaged in payday lending or activities supporting payday lending,” the NCLC wrote in its Sept. 26 letter that was recently posted on the NCUA’s website.
The NCLC said it wants to see an end to federal and state credit unions from investing in, taking finder’s fees from or otherwise engaging with CUSOs that are involved with payday lending.
Since the center ran a report last year denouncing payday loans, it said the number of credit unions that offered them dropped from 58 to 24.
“This form of irresponsible lending creates a variety of compliance, safety and soundness and reputation risks for both the entity that makes the loans and any other entities associated with them,” the NCLC wrote.
The center said it provides legal expertise on consumer law issues to attorneys, policy makers and consumer advocates.
In its Sept. 26 letter to the NCUA, the Center for Responsible Lending, also criticized credit unions and CUSOs that offer payday loans.
“NCUA has in the past rightly taken the position that payday loans are inconsistent with the credit union charter as they are not ‘credit for provident or productive purposes,’” wrote Mike Calhoun and Evan Fuguet from the CRL, a North Carolina research and policy organization that aims to eliminate what it calls abusive financial practices.
The CRL has called on the NCUA to prohibit all credit unions from engaging in “rent-a-charter relationships” with CUSOs to facilitate payday lending, whether the financial relationships are characterized as finder’s fees, revenues garnered from the selling of or participation in payday loans or direct or indirect investment in or funding of payday operations.
Marvin Umholtz, president/CEO of Umholtz Strategic Planning & Consulting Services in Olympia Wash., said he is not surprised the NCLC and the CRL have weighed in on the CUSO proposal.
“I consider the NCLC as a longtime credit union industry nemesis. Now, even more empowered than ever by the Dodd-Frank Act and by the Consumer Financial Protection Bureau, these types of antibusiness, government-interventionist activist groups will increasingly be in credit unions' collective face,” he said.
In August, Umholtz also offered his take on the proposal saying the NCUA is trying to micro manage credit unions and suggested the regulator follow the lead of the Senate Banking, Housing and Urban Affairs Committee, which suggested agencies perform an economic analysis before issuing proposed rule changes.