NEWPORT BEACH, Calif. – The expansion of incidental powers opened doors for credit unions to offer many products and services they once depended on CUSOs to provide directly to members themselves. But this opportunity has come with a new set of best practices, and some CUSO experts say credit unions are still going through a learning curve when it comes to this.
This is particularly evident, offers Pete Snyder, president of financial services consultant firm Snyder Consulting Services and former COO/operations for Addison Avenue FCU, in the staffing models and benchmark standards used to measure operational efficiencies.
"Credit unions that haven't used a CUSO structure to launch a product or service typically try to dilute or water down staffing models to an enterprise model, but that can't work when a credit union tries to apply the same metrics and standards to products they bring in from the CUSO side," says the NACUSO director.
Recommended For You
The challenge on the non-expense side of a credit union's business, says Snyder, is to determine how to integrate and incorporate the product or service that used to be offered under the CUSO umbrella, into the credit union.
"If the credit union initially decided to offer the product or service through a CUSO, then it automatically has a set of standards it uses that are inherent to the CUSO because it's considered a separate company from the credit union with separate financials. The credit union makes the investment in providing a level of expertise to the channel. There's a heightened sense of responsibility if you run something through a CUSO.
"But when a credit union brings the product or service back under the credit union's roof, they don't give it the same expertise. If a credit union, for example, has a mortgage CUSO, they can't assign the responsibilities to a consumer lending manager. You don't take an indirect lending manager and assign them the responsibility of managing mortgage loans. But that's what happens so often. When a credit union adds another product or service under the credit union umbrella it doesn't have the same level of scrutiny it would under a CUSO," says Snyder, adding, "if a product or service isn't in the CUSO then it's perceived to be less expensive to manage."
Snyder says he wishes credit unions were "as diligent" in developing performance standards for products offered inside the credit union as they are for products provided through a CUSO. Credit unions, he says, need to apply a similar template of criteria for performance tracking and monitoring. Without these types of standards, Synder says credit unions can't monitor and track the efficiencies of the product or service to be able to react and make changes when they're necessary.
The solution, he says, "is not to move the program back to the CUSO, but to apply the same standards creatively in the credit union."
NACUSO General Counsel Guy Messick concurs that "the hurdle facing CUSOs and credit unions is finding how they can work optimally with each other." As conduits for financial services, CUSOs have been spared many of the regulatory burdens credit unions have to deal with such as the Bank Secrecy Act. Still, depending on the market a CUSO is in such as investments, Messick points out a CUSO may have to deal with regulations endemic to that market. With the operational costs and expertise required by credit unions now to be in compliance with increased regulations, Messick says "it's a perfect opportunity for credit unions and CUSOs to work together and for CUSOs to provide the necessary compliance expertise. A CUSO, for example, could have an internal compliance officer that several credit unions could share.
"I don't know why more credit unions aren't doing this to relieve themselves of some of their regulatory burden," says Messick. [email protected]
© Touchpoint Markets, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more inforrmation visit Asset & Logo Licensing.
