The Power and Vibrancy of the CUSO System

A special message from Mary Martha Fortney, President and CEO
May 2014

For some time now, the focus of regulatory discussions within the credit union system has been on the role, risks, and rewards of Credit Union Service Organizations (CUSOs).

With all that in mind, I determined to assess the state of the CUSO movement up close by attending the NACUSO Annual Meeting in April this year. It was fascinating. I joined several hundred attendees in discussions of a wide range of issues. I saw a vibrant, dynamic, diligent segment of the credit union movement hard at work for the betterment of the system.

NASCUS, and state regulators, understand that some CUSOs may present material risks to both their credit union owners as well as their clients. This is true of any third-party service provider. As we all understand, risk may be presented in the following: operational risk, legal risk, financial risk, security risk, or reputational risk.

The key in addressing these risks is to mitigate them in an effective and efficient manner while still preserving the immense benefit the CUSO structure provides the credit union movement—and that benefit was on display at NACUSO.

From innovative approaches to operational support of core credit union missions such as loan underwriting to information technology infrastructure, the initiatives on display light the way for credit unions to remain competitive. Building efficiencies and combining resources allow credit unions to maintain their place on the leading edge of providing safe, sound and affordable financial products and services. In addition to leveraging the cooperative underpinnings of the movement, CUSOs afford credit unions the ability to control the manner in which critical third-party services are provided. All of this strengthens the movement and contributes to its safety and soundness.

The challenge for regulators is to recognize that the supervisory touch on CUSOs must not be applied in a manner that does more to drive these service providers out of the credit union system than it does to mitigate risk. I found the attendees and representatives from the CUSO system responsive and open to dialogue with regulators regarding addressing perceived risk. Many noted that a well-constructed supervisory framework could help the CUSO and credit union systems, especially if it was designed to address all third-party service providers, not just CUSOs.

These are discussions worth having.

NASCUS looks forward to continuing to work with CUSOs and credit unions to develop a fair and effective means to mitigate risk. As for NACUSO's 2015 meeting, I am confident NASCUS will be back.

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