NCUA Public Affairs Specialist John Zimmerman on Thursday confirmed that the NCUA Board canceled its June meeting to delay the release of its final CUSO rule.
"The board voted unanimously to remove the final CUSO rule from the June agenda, in order to give staff more time to work on the details,” he told Credit Union Times.
Guy Messick, partner at credit union law firm Messick & Lauer P.C., said he thinks CUSOs are glad the NCUA Board is giving “thoughtful deliberation” to the legality of the rule.
The Media, Pa.-based attorney, who specializes in CUSOs, said the NCUA doesn’t have legal vendor authority to regulate the credit union service organizations. The NCUA did have temporary vendor authority in 1999, in order to deal with the potential systemic risk of the approaching Y2K event on Jan. 1, 2000, but that has since expired.
“The chair would like to have that vendor authority, she has said so,” he said. “But, the NCUA doesn’t have any more authority over CUSOs than they do over other vendors.”
However, Messick said, the regulator can currently ask to inspect CUSO books as they relate to investments during regular credit union exams.
Jack Antonini, president/CEO of NACUSO, agreed that the legal basis for the rule “is highly suspect.” He also agreed that the regulator has access to most of the information they are seeking during exams.
“But, they want to go further and directly regulate CUSOs, and we don’t feel there’s a legal basis for that,” he said. He said instead of a rule, he would prefer a Letter to Credit Unions or regulatory guidance to inform credit unions of what CUSO information they need to make available during exams.
However, Antonini said he “applauds” the NCUA Board for delaying release of the rule until legal questions are resolved, because it would be “counterproductive for everyone if a large CUSO were to challenge the regulator in court.”
The NACUSO executive said he’s also concerned the rule will add to credit unions’ regulatory burden.
Antonini said he sees the delay as an opportunity to work with the NCUA to find a lower cost, less time consuming and legal solution that will provide the information the regulator needs, while minimizing credit union burden.
Antonini said he’s heard the NCUA was planning to scale back the rule to focus only on lending, IT and trust CUSOS, which pose the most risk.