New Risks For CUSOs? Two Sides To Debate
NEWPORT BEACH, Calif.-Credit Union Service Organizations (CUSOs) are poised at a point of tremendous opportunity, according to several analysts. But many are also suggesting that those opportunities may fall by the wayside if Congress grants NCUA further regulatory authority over the CUSOs.
Still, others are saying that such a risk to CUSOs has grown less strong.
Jack Antonini, the new CEO at the National Association of CUSOs (NACUSO) pointed out that while NCUA does currently have oversight over CUSOs, "what they don't have today is direct regulatory authority that would get down to such things as what products [CUSOs] can offer."
While the possibility of regulation remains slim-it was merely one item NCUA Chairwoman Debbie Matz mentioned in a recent testimony before Congress-Antonini pointed out that in an economic downturn, "Congress tends to give regulators what they ask for, because they think 'This is what they must need to deal with the downturn.'" Plus, he said, the fear is that Congress doesn't see the CUSOs' perspective, and fails to recognize that CUSOs provide additional non-interest income to their CUs.
But the move is still a way off, if it happens at all, and Randy Karnes, CEO of Michigan-based CUSO CU*Answers, noted that it shouldn't be taken too seriously until the agency can specifically outline how that regulatory oversight would take place.
"It's like NCUA saying they wish they could regulate the movie industry," said Karnes. "What the hell for? You have to make a solid case as to what relationships you would have with the CUSOs and how you would make it an even playing field."
But The Desire Remains
Still, Matz reiterated that desire in an exclusive interview with Credit Union Journal earlier this year, at which time she indicated an intent to pursue such authority over CUSOs and certain other third-party vendors.
Many interviewed for this story also noted that such a move would lead to an NCUA budget increase that would ultimately be paid for by the CUSOs themselves.
On the other hand, not all CUSO executives see NCUA oversight as a negative thing, including Ed Culpepper, CEO of South Carolina-based Palmetto Cooperative Services.
"It's like credit unions," said Culpepper. "If [NCUA] has credit unions they're not concerned about, they don't particularly worry about them and go in and heavily investigate." He posited that instead, the agency would likely take a similar hands-off approach with the CUSOs unless they had reason to do otherwise.
Beyond the potential for NCUA regulation, many noted that the biggest issue in the coming years will be continuing to invest so as to grow CUSOs. Antonini said that NACUSO is in the midst of putting together a long-term strategic plan, one of the major focuses of which is finding ways to encourage more CUs to form or take advantage of CUSOs. The plan will be unveiled in April at NACUSO's annual convention in Las Vegas.
CUSOs Won't Replace Corporates
While the difficulties in the corporate system can be said to have opened up potential growth opportunities for CUSOs, most agreed that CUSOs will not become a replacement for those corporates.
"I don't think the CUSOs are going to replace a corporate," said Karnes. "What I do think CUSOs are going to do is find unique solutions to offer corporate-like products." Beyond that, he also noted the possibility for someday having a for-profit CUSO lobbying group
Karnes said he was confident that a number of innovative solutions were ahead for the CU community over the next decade, and that CUSOs would play a large part in that.
"Our industry needs hope, and hope only comes from new firms, new ideas, new products and the belief that bringing new into to the market will pay off," he said. "I think CUSOs can be a big part of that hope."
Additionally, the future may also hold increased competition, though Culpepper said it seemed more likely that the industry would see a rise in the number of smaller CUSOs rather than mergers leading to larger CUSOs.
"I think one of the lessons we've learned is that bigger is not always better," said Culpepper.