ALEXANDRIA, Va. – The NCUA Board is expected next week to vote a new CUSO rule that will give the federal regulator greater controls and monitoring over the hundreds of credit union subsidiaries that do everything from data processing to ATM networking to real estate services.
The new rule will require CUSOs—formally credit union service organizations—to submit regular financial reports with NCUA, as well as detailed business information like customer lists and ownership, according to several sources. Questions remain as to whether the rule exempt the smaller CUSOs from the reporting requirements.
The new rule comes as NCUA has failed numerous times to get Congressional authority over third-party vendors, like CUSOs, and as many of the biggest failures in credit unions have been tied closely to CUSO activities. The 2009 failure of Eastern Financial Florida CU, for example, was tied to lending by the credit union giant’s member business loan CUSO. More recently, California’s Telesis Community CU failed because of business loans it sold off to other credit unions ad participations.
NCUA officials say the increased controls over CUSOs are necessary to monitor the credit unions and their various exposures. "This rule is fundamental to monitoring the safety and soundness of the system,” said NCUA Chairman Debbie Matz last year when the rule was issued for comment.
The reporting requirements have been hotly opposed by CUSOs and the credit union lobby which note that CUSOs allow credit unions to compete more with banks by enabling credit unions to pool their resources, and that many CUSOs are the source of innovation among credit unions.