NASCUS said the problem it has with the NCUA's CUSO proposal is that the focus is on supervisory oversight of CUSOs rather than their relationships with credit unions.

“From a holistic perspective, the fundamental problem with NCUA's proposed approach is that it focuses supervisory oversight on CUSOs,” wrote Brian Knight, NASCUS senior vice president, regulatory affairs and general counsel, in a Sept. 26 comment letter to the NCUA. “The efforts of state and federal credit union regulators should focus on the credit union's relationship with its CUSO.”

Knight said the better approach to evaluating the credit union and CUSO relationship would be to emphasize credit union due diligence as part of the routine examination.

“If during the course of an examination regulators conclude a more detailed review of the CUSO is necessary, then authority already exists at the state and federal level to obtain additional information as needed,” Knight wrote.

The trade association also said it believes with proper enforcement of Call Report data quality, state and federal regulators would be better equipped to target risk areas.

The NCUA should fully exempt state-chartered credit unions in states where the state regulator exercises sufficient CUSO oversight to mitigate material risk, NASCUS said. The association also recommended the NCUA reorganize their rules and regulations to ease regulatory burden by consolidating share insurance rules.