USA: Initial Effort Beginning With Compliance

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GLASGOW, Scotland-While CUSOs are widespread in the United States, the nation has nonetheless been slow to fully leverage collaboration among credit unions.

Indeed, the U.S. trails many other countries when it comes to collaborating to create greater backoffice efficiencies, in part because the U.S. movement developed before such collaboration was feasible.

But an effort is underway in California and Nevada to create a cooperative that seeks to centralize a number of cost centers for credit unions. CURoots Cooperative was launched in January 2011; it now has 16 owners, 14 of which are retail CUs, with the other owners being the California/Nevada league and CO-OP Financial Services.

"What has caused credit unions in California and Nevada to consider forming a collaboration cooperative were the losses experienced due to corporate CU losses, as high as $8 billion, and the wiping out of retail credit unions' capital investments," said Lucy Ito, CEO of CURoots. "Another factor hitting credit unions is what I call 'regulators remorse.' Elected officials and regulators didn't see the crisis coming and now believe too tough is better than not tough enough, even if this discourages credit union growth."

Ito, speaking to the World Council of Credit Unions' World CU Conference, noted the compliance burden in the U.S. has been "relentless" and "just keeps growing."

"We see a lot of redundancies and duplication in credit unions in HR, data processing, mobile technologies, collections, ALM and more," said Ito.

CURoots, said Ito, was formed to maximize CU savings and enable affordability, to free up CU managers to focus on growth strategies and member-facing functions, and to minimize unnecessary redundancy.

As of July 1, CURoots had nine credit unions totaling $1.5 billion in assets sharing two full-time compliance officers. CURoots charges separately for onsite and remote visits, with a daily fee plus travel expenses charged. It also does one-off internal audits (nonaccounting) as well as policy and procedures reviews.

The benefits, according to Ito, include one credit union that previously spent $100,000 annually in compliance related costs that is now spending $50,000 with CURoots for the same services. "For smaller credit unions, the opportunity cost savings comes to the CEO and executives who are now able to focus on growth."

Ito acknowledged CURoots faces a challenge in how "labor-intensive" it is to understand a particular credit union's policies; it is seeking to create a compliance management process in which policies are uniform among participants and as a result it is easier to make changes and updates.

About Health Care Costs...

CURoots is now looking at ways to collaborate and reduce health care costs. Some 105 credit unions have agreed to submit census data that they can use for negotiations with benefits brokers.

Information technology is also exploring an automated policies portal, and pooling efforts on pooling collections, risk analysis, loan processing, legal advisory services and IT operations. "Basically," said Ito, "everything that happens behind the scenes."

CURoots, which has seven board members and participants from $40 million to $700 million in assets, requires a $20,000 membership purchase that remains on the CU balance sheet as an asset. Given the current rate being paid on overnights of .25%, that equals $50 a year, or $4.17 a month. All owners have equal rights.

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