Guest Opinion: Where Do CUSOs Go From Here?
The year 2012 produced highs and lows.
From Team USA winning 104 medals in the 2012 Summer Olympics, of which 46 were gold – more than any non-boycotted Olympics since 1904 – to the mega-disaster of super storm Sandy and the huge swath of destruction it caused in the northeastern U.S.
Beyond the unimaginable costs from Hurricane Sandy with damage estimates ranging from $60 to $80 billion, of the 2,000 credit unions located in the path of the storm, 838 or 42% were unable to operate to varying degrees in the difficult days that followed landfall on Oct. 29. A week after the devastation occurred, 729 of the 838 credit unions were again fully operational. They opened not without some scars, including frustrated members who were unable to access their accounts, cash and direct deposits.
Good 2012 lessons to carry into 2013
Well-prepared credit unions that had solid backup recovery operations and proven back-up call centers were able to continue to serve their members. Because of the stark differences in member experiences following Sandy, you can expect the NCUA will look at disaster recovery plans much more rigorously.
Fortunately, as has been the case in several past natural disasters, CUSOs are available to help you. CUSOs have helped keep systems up and running for credit unions in Sandy’s path. Others provided call center back up and disaster recovery for credit unions in New York and New Jersey. Two of the industry’s largest CUSOs were also on the forefront with comprehensive call center services.
CU-owned collaborative solutions matter and they work
In 2013, there will be a renewed emphasis on business continuity and disaster recovery. The good news is you don’t have to start from scratch and build these capabilities yourself. CUSOs are available that are prepared to help you strengthen your plans and ensure your members continue to have access to their accounts when they need them the most.
Other areas where CUSOs helped credit unions deliver better service and product value to their members in 2012, and will be even more important in helping credit unions compete in 2013, include:
Operational CUSOs that help provide cost savings that allows the credit union to provide best value loans and deposits, along with outstanding service.
IT CUSOs that help provide cost savings and expertise a credit union might have trouble obtaining on its own.
Lending CUSOs that not only help credit unions with the necessary expertise, but also help members find the right indirect auto loan or secure the proper underwriting to help credit unions make indirect home improvement loans.
Compliance CUSOs not only help credit unions with hard-to-find expertise, they help keep the them compliant with the ever-increasing burden of new rules and regulations as a result of the Dodd-Frank Act and the plethora of new rules the Consumer Financial Protection Bureau is preparing to issue.
Shared branching & ATM services that help credit unions have the same geographic reach as the biggest banks.
CUSOs make a difference
Speaking of competing with the nation’s biggest banks, it’s not just the number of convenient branches and ATMs that members want, credit unions who have not already implemented a mobile banking solution for their members are facing that issue head on in 2013. The market is expecting it, and members are asking for it. A new delivery channel that allows a member to pay bills, make deposits with remote deposit capture photo images of checks, and check balances is the most in -demand new feature among financial institutions of all sizes and types.
Again, there are CUSOs that can help you provide these solutions all the way to the most advanced mobile banking applications such as mobile wallets. Other CUSOs have additional innovative solutions ranging from payment solution to comprehensive check imaging solutions.
CUSOs remain on the front lines and we want to see them stay there without unnecessary regulatory or supervisory burden.
Potential CUSO issues
Along those lines, another development that started in 2012 and will certainly accelerate in 2013 is CUSO reviews from the NCUA. Last year, CUSOs across the country were contacted by the NCUA advising them to prepare for a CUSO review. Some of those who have already gone through their reviews in 2012 have some tips for those who want to prepare, including:
Know what to expect during the CUSO Review, and be prepared. You can see what the NCUA expects in chapter 7, starting on page 167, of the NCUA National Supervision Policy Manual. Go to http://www.ncua.gov/legal/guidesetc/guidesmanuals/supervisionmanual.pdf for the details.
One of the things that we discovered while talking with those who have been through the CUSO review process and we have confirmed with NCUA senior staff is there are no established CUSO review guidelines for NCUA examiners to follow. In order to ensure that CUSO innovation and development is not stifled, such guidelines are needed. Therefore, working with the NCUA, NACUSO is assembling a working group to coordinate with the agency in the development of these guidelines.
One last trend that we noticed from the NCUA in 2012 and is likely to continue into 2013 is requiring credit unions to have certain specialized lending expertise in-house, rather than relying on a CUSO that credit unions have invested in to have the expertise.
This has been most glaringly apparent in the member business lending area. Because of the 12.25% MBL cap, many smaller credit unions could not afford or obtain the necessary expertise to build a profitable portfolio, due to size limitations. So, they did the next best thing. With the blessings of the NCUA, several credit unions started a business services CUSO to help them find, underwrite, properly document and service MBL loans.
NACUSO is concerned that after encouraging the use of CUSOs to help smaller credit unions acquire the expertise necessary to properly originate and service these more complex loans, it is now forcing these same credit unions to increase their costs by requiring them to have this expertise in-house.
The primary advantage that the credit union movement has had when competing with their much larger bank competitors is the ability to work collaboratively through CUSOs, and share the costs of developing new products and services that would be cost prohibitive for a single credit union on its own. If the NCUA is going to undermine the use of collaborative CUSO solutions, the future of credit unions will be adversely affected.
Along with the credit union community, NACUSO will continue to work with the NCUA to encourage their ongoing support of CUSOs. A vibrant and vital CUSO system is, in our view, critical to the survival of the credit union movement. This safe and logical form of collaboration through CUSOs is a cornerstone of the modern credit union and an important competitive advantage.
Jack Antonini is president/CEO of NACUSO. Contact 713-208-0989 or firstname.lastname@example.org.