If the NCUA changes the way CUSOs are regulated, it would “single-handedly kill the one competitive advantage the credit union industry has,” said a Kansas CUSO CEO.
That advantage would be “a unique business model that enables collaboration and innovation so credit unions can achieve economies of scale, increase efficiencies, share intellectual capital, provide better service to members, and mitigate risk,” said Lisa Renner, CEO of CU Holding Co. LLC in Lenexa, Kan.
The CUSO said it provides payroll, marketing, short-term lending, mortgage, title, and research and development services to more than 200 credit unions.
“Increasing regulation will put CUSOs at a competitive disadvantage with non-CUSO competitors,” Renner wrote in an Aug. 4 comment letter to the NCUA. “First, it increases overhead costs for CUSOs making it difficult to compete on price. Second, it exposes confidential business plans, balance sheets, income statements and customer lists.”
Renner said through decreased expense and increased income, CU Holding has benefited its CU owners and clients by hundreds of thousands of dollars. However, measuring CUSOs by the same metrics used for CUs could be detrimental in the long run.
“In the broader business environment, you would not measure an IT firm against a marketing company, or a payroll company against a mortgage company. Yet, if all CUSOs are lumped together and measured against the same metrics, that's exactly what will happen,” Renner wrote.
Loan losses caused by several business lending CUSOs should not be a reason to penalize all CUSOs, Renner said.
“Even if CUSOs that make business loans pose a risk that need addressing, NCUA's attempt to apply a regulatory cure for a business lending CUSO to all CUSOs is misguided when business lending CUSOs are estimated to constitute less than 1% of total CUSOs,” her letter said.
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