NAFCU says CUSO proposal is over-reach
NAFCU strongly opposes NCUA's proposed rule on credit union service organizations as it would significantly increase NCUA regulatory oversight of CUSOs and extend beyond the agency's statutory authority to regulate federally insured credit unions, NAFCU President Fred Becker said Friday.
NCUA has proposed a rule that would require CUSOs to submit financial reports annually to NCUA and state regulators that provide not only financial information but a list of services the CUSO provides, a customer list and information about the CUSO's board and management. It would extend the CUSO rule, including the proposed financial reporting requirement, to CUSO subsidiaries, and it would extend certain requirements in place now for federal credit unions to federally insured, state-chartered credit unions.
Becker, in an official comment Friday, said CUSOs have long been strong partners for credit unions in meeting members' needs. They have provided a wide range of services to credit unions – investments, marketing, insurance, among others – and have helped credit unions keep costs down. Requiring CUSOs to report directly to NCUA would impose added costs on credit unions, he said, and requiring them to submit customer lists would require CUSOs to "compromise a valuable and well-guarded asset."
"During these challenging economic times, credit unions need to be able to function effectively from a business standpoint, and not endure increased unnecessary regulations," Becker wrote.
Becker challenged NCUA's assertion that CUSOs pose a systemic risk to credit unions and, in turn, to the National Credit Union Share Insurance. Credit unions working with CUSOs, in the vast majority of cases, do so "well within" regulatory parameters and in accordance with all applicable laws and rules, he said.
The most recent data available show about 22 basis points of credit union assets have been invested in or lent to CUSOs – less than one-fourth of the amount they are authorized to invest and not significant enough to be viewed as posing systemic risk. Additionally, this proposed rule takes NCUA beyond its traditional role of regulating and overseeing only federally insured credit unions. "NAFCU cannot support a rule that creates additional regulatory burden without seeing a real need or benefit," he said.
Becker added that NAFCU does not believe NCUA has the legal authority to require CUSOs to submit their financial reports to the agency. "The agency is simply over-reaching as it lacks statutory authority, and NAFCU does not believe the agency should resort to the proposed mechanism to effectively regulate and oversee CUSOs," he said. He added, "NAFCU strongly believes that the NCUA should reconsider the proposed rule."
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