The National Credit Union Administration’s CUSO Registry will open its required annual “reaffirmation period” next week with one significant change – there’s a lot less anxiety for registrants in 2017 than there was
The reaffirmation period runs from
When the registry was launched in 2016, CUSOs were concerned that it represented yet another compliance hoop to jump through, as well as the possibility that competitors could use the information contained in the registry against CUSOs. This year, said Jack Antonini, president and CEO of the National Association of Credit Union Service Organizations, the mood is generally calmer, with some wariness due to factors unknown at this time.
“For CUSOs that have not changed since the initial registration last year, they do not have to really do anything other than verify that their information is the same, so that is fairly simple and not time consuming,” he assessed. “As we understand it, NCUA wants to proactively get an update from each CUSO each year to ensure the information they are using as part of their credit union exams is accurate and up-to-date, as well as helping them to decide which CUSOs to review and how frequently.”
Since most CUSOs did not have a difficult time completing the registry initially, “this time through should be less difficult, as I am not aware of any new requirements being added to the CUSO Registry,” Antonini said. “As time goes by, things that at first are challenging become more routine.”
Basis for future CUSO reviews
Antonini said NCUA has told NACUSO the regulator plans to use data collected from the CUSO Registry to help provide basic information about multi-owned CUSOs that credit unions have invested in, and to help the agency in conducting credit union exams so examiners do not have to conduct CUSO reviews each time they do a credit union exam.
“Instead, NCUA can go to the central CUSO data to learn what the examiners want to know about potential risk at/from the CUSO. They also indicated they may use this information to help them prioritize which CUSOs they want to review, and how frequently, to place their examination emphasis where they perceive the greatest risk is to the Share Insurance Fund.”
Antonini said one aspect of the initial registry that actually turned out to be easier to comply with than initially expected involved NCUA “backing down” from the broader information request contained in the initial CUSO rule, which was passed by the NCUA Board in November 2013. Ultimately, he said, only those CUSOs that were deemed to provide “high risk and complex services,” such as credit and lending, IT, custody, safekeeping and investment management services, had to provide the more detailed information, which included CUSO financial statements, customer lists (credit union customers only) and ownership.
“The fact NCUA conducted a 'beta test' with a couple of dozen CUSOs helped work out the kinks ahead of time, so by the time the rest of the industry was logging on to the CUSO Registry to complete it for the first time, the NCUA had already made it easier, and had developed instructions that helped explain what to do,” Antonini said. “In the end, I did not hear of many CUSOs complaining of the time it took to complete the CUSO Registry, those defined as ‘high risk and complex’ knew it, and were prepared.”
According to a letter sent by NCUA to credit unions, the regulator felt it needed more accurate information about CUSOs to better evaluate the risks to credit unions, as well as the inter-relationships between credit unions and CUSOs.
“The CUSO Registry will also reduce credit unions’ reporting burdens,” NCUA wrote in its letter to credit unions. “Rather than requiring numerous credit unions to individually submit information about the same CUSO, each CUSO is required to report its information directly to NCUA. This change is also intended to improve data quality about CUSOs since CUSOs themselves are in the best position to provide accurate and contemporary information on their organization.”
Where are you going with that data?
Last April, not long after the close of the deadline for the initial registry, Brian Lauer, partner in the Philadelphia-based law firm of Messick & Lauer, a CUSO-focused law practice, told Credit Union Journal the actual submission process was “mostly smooth.” The two biggest concerns, Lauer said, were a legal issue with the acknowledgement CUSOs had to agree to in order to submit their registry entry and fears about use of data collected.
“NCUA says it only will make general information available, but I am not sure they have that down,” Lauer said in April 2016. “It is not clear what will or will not be available under the Freedom of Information Act. We think NCUA should get a legal opinion to define what will be accessible.”
This week, Lauer told CUJ he is optimistic the acknowledgement issue, at least, is resolved.
“What happened last year was our first introduction to the registry. We didn’t see the acknowledgement until after the CUSOs logged in and started the registration process,” he recalled. “One of those CUSOs read the acknowledgement carefully, and the acknowledgement was based on credit unions and their relationship to NCUA. In this situation, it was not that the CUSOs wanted to submit untrue information; they should not submit that acknowledgement because the statutes did not apply to them.”
Both Lauer and NACUSO’s Antonini commended NCUA for being “really good” about working with the firm and the trade group to resolve the issue with a revised acknowledgement just one week after the issue was brought to the regulator’s attention.
“The open communication with Lisa Dolin, Scott Neat and Buddy Gill at NCUA and staff that were supporting the process, appeared to be effective in dealing with the questions that came up,” said Antonini.
“I would presume the reaffirmation will use the revised acknowledgement, but we will not know for certain until the CUSOs start the reaffirmation process in February,” Lauer added. “Nothing tells me the process or the system will be different from last year. I fully believe everything will work as it did last year. It will be interesting to see how many new CUSOs will register, or CUSOs that should have registered that came in late.”
Asked if he has other concerns on behalf of CUSOs, Lauer said there are “always issues CUSOs should be looking at.”
“Right now, folks are watching the new administration and how that will affect NCUA and credit unions,” he said. “There has been a lot of regulation over the past few years, including [the Consumer Financial Protection Bureau] and its watch over collections and auto lending, so there is a lot of talk about how that might be affected by the Trump administration. The biggest question is who will be in charge of the CFPB.
“We hope the NCUA’s changes to the member business lending and field of membership rules is the start of a trend that will continue – regulation that is supporting and helping the industry.”
