(Nov. 12, 2021) A summary of NCUA’s new rule on federal credit union service organizations (CUSOs) – adopted Oct. 21 by the NCUA Board on a 2-1 vote – has been published by NASCUS; it is available to members only.
The final rule gives CUSOs owned by FCUs the power to originate any type of loan an FCU may originate – and give the NCUA Board more flexibility in approving permissible CUSO activities and services. It becomes effective Nov. 26. Board Chairman Todd Harper voted against finalizing the rule.
By allowing FCU-owned CUSOs to originate any type of loan an FCU can, the list of permissible loans by FCU CUSOs is expanded from only business loans, consumer mortgage loans, student loans, and credit cards. The list of new loans includes automobile and small-dollar (payday) loans – the two types NCUA has said would likely draw the newest involvement by CUSOs.
In its comment filed on the proposal last spring, NASCUS noted as a key concern with the proposal that possible, additional reporting requirements for state credit unions could be a result of a finalized rule. NASCUS noted that the proposal could influence state credit unions considering collaborating with FCU investors in the formation and ownership of a CUSO – a condition that prompted the association to comment.
In some states, NASCUS pointed out, CUSOs owned by state credit unions already hold expanded lending power. The association noted, however, that the NCUA proposal could end up requiring additional reporting requirements that don’t today exist for SCUs. “NASCUS opposes extension of any additional reporting requirements to SCU CUSOs resulting from an expansion of FCU powers,” the association wrote.
Following the rule’s adoption last month, NASCUS President and CEO Lucy Ito said the association views the final rule as a “natural evolution” in a robust dual charter system. However, she noted the additional reporting requirements and added that the state system will review the final rule closely and work with NCUA to resolve any unintended, negative impacts on state credit union CUSOs.