ALEXANDRIA, Va. – State credit union regulators urged NCUA today to withdraw its proposal to increase oversight of CUSOs, saying the measure won’t do what it is intended to do and could exceed the federal regulator’s legal authority, thereby inviting a public legal fight.
“NASCUS urges NCUA to reconsider this proposal and work with state regulators to enhance supervision by improving existing authority and monitoring programs, and minimize regulatory burden by adopting a targeted approach to CUSO oversight,” Brian Knight, senior vice president for regulatory affairs for the National Association of State CU Supervisors, told NCUA in a comment letter submitted this morning.
NCUA’s proposal, which would require all CUSOs to submit business plans, financial reports and customer lists to the federal agency, has attracted broad opposition from the credit union movement, with CUNA and its state leagues, NAFCU, as well as dozens of credit unions and CUSOs registering their objections. But the NASCUS position is unusual in that the state regulators rarely express public opposition to NCUA, with which they partner on the oversight of state chartered credit unions.
Among other things, the groups all assert that NCUA does not have the legal authority to regulate or oversee third-party credit union service providers like CUSOs, most of which are state licensed.
"From a holistic perspective, the fundamental problem with NCUA's proposed approach is that it focuses supervisory oversight on CUSOs," stated Knight. "The efforts of state and federal credit union regulators should focus on the credit union's relationship with its CUSO. NASCUS believes that existing rules and regulations directly applicable to federally insured credit unions provide ample authority to review relevant information on that relationship."
The state regulators asserted the proposed changes will “unnecessarily drain the resources of both regulators and the industry by capturing information from CUSOs engaged in non-financial services which may have minimal balance sheet safety and soundness implications.”
NASCUS suggested NCUA fully exempt state-chartered credit unions in states where the state regulator exercises sufficient CUSO oversight to mitigate material risk.
“NASCUS is confident that NCUA and state regulators can develop a targeted CUSO supervision program that addresses legitimate regulatory concerns while preserving the benefits CUSOs provide the credit union system,” wrote Knight.
