NCUA's CUSO Proposal

Melane Conyers-Ausbrooks
Secretary of the Board
National Credit Union Administration
1775 Duke Street
Alexandria, VA 22314-3428

Ladies and Gentlemen:

The American Bankers Association (ABA) appreciates the opportunity to provide comments to the National Credit Union Administration (NCUA) on a proposed rule (Proposal) that would amend its credit union service organization (CUSO) regulation. Specifically, the Proposal would significantly broaden the regulation’s list of permissible activities and services for CUSOs to include the origination of any type of loan that a Federal credit union (FCU) may originate. The Proposal thus would authorize CUSOs to engage in new, multiple, and aggressive forms of lending. The Proposal would also grant to the NCUA Board the authority to approve additional activities and services for CUSOs without affording a formal rulemaking process. The NCUA further is seeking comment on broadening the authority of FCUs to invest in CUSOs.

Preliminary Statement

According to the NCUA Office of Inspector General (OIG), “[t]he NCUA’s mission is to provide, through regulation and supervision, a safe and sound credit union system.” Consequently, in its recently released audit of NCUA examination and oversight of CUSOs (Audit Report), OIG stated “the NCUA needs authority over CUSOs . . . to effectively identify and reduce the risks vendor relationships pose to credit unions in order to protect the National Credit Union Share Insurance Fund [NCUSIF].” Based on its audit of NCUA examination and oversight authority, OIG concluded:

Although the NCUA conducts CUSO reviews, there is currently nothing in the Federal Credit Union Act that provides the NCUA with the authority to supervise CUSOs and vendors and hold them accountable for unsafe and unsound practices . . . As a result, the NCUA’s [NCUSIF] is exposed to risk from CUSOs and vendors that can cause significant financial hardship, or even failure to the credit unions that use them.”

Download the comment letter to read the full text.