As discussion of the impacts of NCUA’s recent memo outlining termination dates for various services offered by U.S. Central Bridge grows in the industry, one deadline has generated heated discussion–and worries–on the part of some credit union leaders. That is auto settlement, a comparatively obscure wholesale settlement service where U.S. Central Bridge acts as a kind of middleman between large vendors (ATM networks for instance) and corporate credit unions and, in turn, their members. Nothing comparable exists in the traditional banking world, said sources, and finding replacements by the May 31 termination date set by NCUA is proving to be a challenge.
“While Dec. 31, 2012 may be enough time for the ACH conversions, the May sunset date for auto settlement will be a challenge unless the entire platform can be sold to a third-party,” said Thomas Bonds, CEO of Corporate America.
At Catalyst, Vice President Amy Fuller said, “This will be a challenging transition as it does not exist elsewhere in the market.”
Alloya, for its part, issued this statement to its members, “Alloya stands ready to work with national originators if they desire to create a direct relationship with Alloya. If a direct relationship is not feasible, then Alloya will help facilitate the transition of the payment activity between the vendor and Alloya’s member credit unions to ACH settlement and/or template wires.”
At Lending Tools, the Wichita, Kan.-based provider of various payments solutions, CEO Eric Goering said, “This shutdown will be stressful for some corporates. It will be a big deal.”
He optimistically added, “It will get figured out.”
What is also known is that different corporates will fare differently depending upon exactly how much use they made of U.S. Central’s auto settlement services.
The chief financial officer of one corporate–who requested anonymity because he was not authorized to speak on the topic–indicated he believed that, for many credit unions, the only real impact will be that “they need to fill out a lot more paperwork and it may cost them more, but settlement will get done.”
The NCUA, when asked about complaints regarding the May shutdown of auto-settlement, indicated it had no comment. The NCUA did indicate, however, that it had no plan to sell auto settlement to a third party.