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At a keynote session at NACUSO’s annual conference, Hyland provided NCUA’s perspective on some of the more timely issues concerning CUSOs including the regulator’s letter that addresses examiners delving into credit unions’ relationships with third-party vendors, such as CUSOs. The guidance, she said, is a common sense approach to ensuring that credit unions are implementing due diligence not only during the search process but throughout and after the contract has been signed.
“The process begins with how do you start evaluating vendors,” Hyland said. “What direction are you going in and what is your strategic plan?”
Hyland said that getting the vendor’s financials–and making sure the entity is legitimate–is a critical part of the process. She doesn’t want credit unions to get the impression that NCUA is trying to stifle innovation and the means to provide additional products and services, but the agency’s role will always be one of assessing all the risks. That can be frustrating for some credit unions.
“Some credit unions are so eager to get the service out the door, they’ll go with the contract provided by the vendor, which, with all due respect, tends to favor the vendor,” Hyland said.
Even after the credit union has gone through the due diligence channels, is satisfied with the financials and seals the deal with a vendor, this is not the time to walk away into the darkness, Hyland said. Credit unions must still monitor the alliance to make sure the vendor is providing the service and if not, why.
Communication with examiners helps the entire process, Hyland said. She acknowledged that there are gaps.
“Remember, we’re a part of federal government so we’re about 20 paces behind you,” she said. By explaining to examiners what credit unions are and aren’t doing, examiners will have a better assessment of the risks involved.
“It makes it easier for examiners to filter out the noise and eliminate the red herrings,” Hyland said. NCUA senior policy adviser to Hyland, Gary Kohn, had a bit of advice for those concerned about the future of credit unions under the Department of Treasury’s Blueprint proposal: “don’t lose any sleep over it.”
Kohn discussed some of the highlights of the proposal that includes a provision to consolidate all the depositor institution charters to one. There is a “reserve option” for cooperative ownership structure, essentially, a community option that would provide tax-exempt status, he added.
“The proposal is taking some aspects of credit unions and shrinking [the model] way down,” Kohn said.
Some of the provisions could see the light of the day, Kohn said; for instance, regulation of the mortgage brokerage industry and combining the FDIC and the Office of Thrift Supervision. The other short- and long-term provisions will take an overwhelming amount of support to see them through to the end, he told attendees.
“In order to get something like this done, there needs to be strong leadership from the president and Congress,” Kohn said. “Don’t lose sleep on this. Constantly let Congress know how you feel.”
—msamaad@cutimes.com
