News & Highlights

Better, Faster, Cheaper. How One CU Got All Three With a Core Conversion

NACUSO is on a mission to tell stories of collaboration, innovation and cooperation that not only strengthen the credit union movement but also are in the best interests of our members. We believe that we’re better together. We also know that the CUSO model has mitigated the need for many credit unions to merge by obtaining economies of scale and driving efficiencies. CUProdigy is a great example of helping credit unions with a quality cloud based core that is affordable. We heard about the tremendous cost savings and reached out to a recent convert, Roy MacKinnon, CEO of Edwards FCU.

Roy, first, tell me a little about your credit union.

Edwards FCU was founded in 1962 on Edwards AFB in California and was originally chartered to serve personnel on the base. Edwards FCU received a community charter shortly after 2000 as many military base credit unions did.  Today, we serve all of the Antelope Valley, which is nicknamed Aerospace Valley because, in addition to the Air Force base, other major manufacturers are here like Lockheed, Northup Grumman and The Spaceship Company. We are proud to say that Edwards is the only locally born and raised credit union that’s still headquartered in the Antelope Valley.

How did you come to work at Edwards FCU?

I became the CEO of Edwards in May of 2016. Previously, I was with First Entertainment Credit Union for 25 years. This was my first CEO gig and I knew what I was walking into. I was handed a financial statement showing a $120K loss and 7.2% capital the first month. I immediately initiated a freeze on just about everything. By mid-year we were running at an annual loss of about $200K. By year-end, with a significant expense reduction and with the financial benefits of a PSCU conversion, we reduced our year-end loss to just $5,900.

I felt a missed opportunity existed, one that many credit unions encounter when they convert to a community charter – founding segments are ignored. In this case, it was the air base. I told the board that if they hired me, we would go back to our core, get our house in order, and then when we’re a little healthier we’ll go back to the community in a very disciplined way.

Speaking of “cores,” during this time I discovered how bad and antiquated our core system with Fiserv Summit was.  It was coded in an era that I consider pre-digital, pre-internet, pre-mobile, even pre-GUI!  The original core code was written in the 1970s. I knew I would have to replace the core but we were in a long-term contract.

When did you find out about CUProdigy?

Early this year I decided to start the search for a new core. We had a relationship with CUProdigy through their cloud managed services and we looked at other platforms like Correlation, which is a browser-based core like CUProdigy. Both have modern code and easy to navigate screens. Most people might not appreciate that but on our current system when a member wants to make a deposit it takes staff 9 different screens to process some transactions. One or even two click transactions are a revolution in our eyes. Data is what I want most from a core. But the men and women in the trenches, managing moments of truth, need a core that can provide good service to our members. CUProdigy provides that too.

Yet, as we went through our process of core selection, it never occurred to me that what we really should be looking for is our cultural fit with the core provider. It also never occurred to me that a CUSO might have the same kind of culture that a credit union does. It has been my experience that a for-profit core does not always put your interests first like a CUSO.

Out of our staff of 44, we had 14 people involved in all the meetings to select the new provider. They were the ones that keenly picked up on CUProdigy’s culture and ultimately selected the CUSO as the clear winner. The bonus was it was definitely the platform I wanted, but it was their commitment to collaboration that sealed the deal. Anthony, the CEO, and Amber, the Chief Product Owner, – I feel like they work for Edwards CU – the pricing was great, but they brought it all home. When my staff said this is the best way to go, just for fun I said let’s take pricing out of the mix – would you still will pick CUProdigy? All but one staff member said, “Absolutely!”  We didn’t want to pick a vendor just because it was the less expensive; we wanted the best fit. For all intents and purposes it was a unanimous decision.

We estimate that we will save at least $500,000 over the next 5 years because of CUProdigy’s $1 per member per month subscription model. And that’s just in already identified areas.  Our five-year projections also include eliminating third-party loan add-ons and I would not be surprised if we save an additional $250,000 to $400,000 because we won’t renew certain contracts. We expect to save a lot of money with our relationship with CUProdigy.

What will you do with all the savings from converting to CUProdigy?

What do I hope to do with that savings? Our savings rates have had to be the lowest in our marketplace as we still need to build capital. But it’s been important to me to return value to our member savers, so we hope to slowly begin inching our CD rates back up to a competitive level. When the Fed does begin to inch up rates, I’ll be more likely able to hold onto our core deposits. Our savings will definitely bolster our capital. I won’t sleep really comfortably until we are over 8% and closer to 9%.

And finally, I believe our partnership with CUProdigy will help us with our ultimate goal of rebranding and recommitting to our founders and the community. Our busiest branch is in Lancaster – and it is like stepping back into the 1970s. This branch was purchased from a bank that left town. Everything in the branch was purchased such as solid oak desks, green marble on the teller line, dark wood and even faux stained glass that divides the mezzanine. In its day, it was a showplace. Today, we need a fresh start, a modern look, new furniture, a bright airy atmosphere and I will use the savings from CUProdigy’s core to launch Edwards FCU 2.0.

 

Taking a Breath at Year End and Peering Over the Cliff by Guy Messick

This change thing is exhausting.  In 2017 our capacity to adjust to change has been challenged.   Every day we wake up to see what the Tweeter in Chief said in the middle of the night and who he offended.  We wake to discover which TV or political icon acted inappropriately in his past.   We hold our breath with every North Korean missile launch to see what terrifying threats are going to be tossed about by leaders with fingers on buttons.

So assuming we are still alive and can focus on business in 2018, let’s examine the big change issues for credit unions.  The regulatory side looks favorable for 2018.  Now that Mick Mulvaney has taken over the CFPB, we can expect that the regulatory overreach by the CFPB will halt.  NCUA, with Chairman McWatters, is in regulatory cut-back mode.

In 2018, more credit unions will begin to escape from the clutches of legacy core processing systems.   The business model for some of the legacy core providers is to sell you technology that was developed forty years ago and charge credit unions through the roof to connect other software to the core.   That model is excessively expensive, slow to adapt and slow to implement.   In response, credit unions banded together and raised over $26 million to form the CUSO Constellation Digital Partners, LLC.   Constellation is developing technology that will enable credit unions to pick and choose which apps they wish to provide to their members and then easily connect the apps to the credit union’s core system.  It is core neutral.  The technology will enable credit unions to both compete with fin tech providers and take advantage of the technology developed by fin tech providers.   Credit unions will encourage software developers to create software for credit unions using code that will enable the software to be delivered inexpensively and efficiently.  Innovators take note of this opportunity.

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How a $10 Million, 5-Person Credit Union Created One of the Best FI Websites in the World

Over two years ago we wrote about this amazing credit union in Roswell, New Mexico.  And about a year later we interviewed their CEO in a Spotlight article. Both of these stories focusing on how small credit unions are vital and remain viable through collaboration. 

We were so excited to receive a story from the CU Service Network, that highlighted one of their members – this very tiny, very bold small credit union, The Florist FCU.  Enjoy!

Every year, the folks over at The Financial Brand publish a list of the top FI websites around the world. We at CU Service Network look forward to their listing all year because they showcase such beautiful and original websites, shattering the concept that banking is boring and dull. We also enjoy keeping up-to-date on industry trends and branding because it helps us serve as consultants for our clients.

Back in August, I was browsing their recent article 20 Visually Stunning Website Designs From Banks & Credit Unions and did a double take. My eyes weren’t playing tricks on me: $10M, 5-employee The Florist FCU was listed.

I wasn’t the only one that was shocked. Cisco Malpartida Smith, CEO of The Florist FCU, was as well. After spotting the listing, I immediately emailed the CEO to share with him the great publicity. “I had no idea,” he responded, bluntly.

“My first reaction was, ‘We couldn’t possibly be on a list like this. How does it even logically make sense?’ he said, laughing. “It’s very humbling.”

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A Loyalty Program for Good Times and Bad

By Annie Cox, VP, Loyalty Solutions, PSCU

PSCU prides itself on its loyalty program for Member-Owner credit unions. However, in the wake of recent natural disasters — specifically, Hurricane Maria and earthquakes in Mexico — program administrators used the Credit Union Service Organization’s credit card loyalty program to demonstrate the personal connection between credit unions and their members that distinguishes PSCU from other financial services providers.

PSCU’s credit card program offers a number of reward-redemption options for cardholders. For those enrolled in PSCU’s CURewards®, one of the most popular choices is applying points from purchases to travel expenses, including flights, hotel rooms and car rentals. PSCU has partnered with Montrose Travel for more than 20 years to administer this aspect of CURewards. As reports about devastating storms and earthquakes began to make headlines, Montrose Travel and PSCU began to realize that some of their credit union members might need “above and beyond” assistance.

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The Credit Union Member Experience: Why Digital is the Future

This article is printed with permission from CloudCherry, a Gold Partner with NACUSO. To read more about member experience subscribe to their blog! Enjoy.

Credit Unions across the US are focusing on Member Experience as their core reliable mantra to grow. Member Experience programs are being designed carefully and strategically to ensure that members and their needs are listened to and taken care of. In an attempt to understand why more and more credit unions are undergoing this change in mindset, we spoke to Ralph Cumbee, Chief Experience Officer of Solarity Credit Union, a Washington State-based Credit Union serving over 50,000 members.

Ralph has been in the financial services industry for over 25 years; we had the opportunity to catch up with him and understand the nuances of Member Experience in Credit Unions. He spoke about a lot of exciting and forward-thinking concepts, drawing some funny yet hard-hitting analogies along the way.

We’re happy to share with you all the wisdom that we gathered from our chat with him!

CloudCherry: Can you take us through how you started off on the member experience journey?

Ralph: Alright! So, it started about two years ago when we were having strategic discussions pondering how we would position the organization going forward. What would our one differentiator be? Because if you look at it, there are only so many differentiators in the market! We realised that digital is the way of the future and that in such a world it all really boils down to the experience. And we thought that member experience is going to be the most “beneficial” differentiator. All literature available out there suggests that organisations that focus on Member Experience performed better. People love them and they become the Amazons and Apples of the world. This is real differentiation.

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Don’t Miss the Boat – Why Credit Unions Need to Digitally Transform Now

The term “digital transformation” has been a very hot topic recently, creating new conversations and products across a wide range of industries. This chart below, via Google Trends, displays the worldwide popularity of the phrase “Digital Transformation” in web searches since 2004. As shown in the graph, after remaining stagnant for over a decade, the term’s popularity has exploded in just the last year or so, raising questions about what this means, and how it will impact your organization.

An accepted definition for digital transformation is, “the application of digital technologies to fundamentally impact all aspects of business and society.” The important part of this definition is to realize that digital transformation does not mean just building a website, a mobile app, or obtaining a data warehouse. It means using your digital technology to transform your business processes. It means shifting your company culture to take advantage of your digital data to make informed data-driven decisions and stay ahead of the ever-changing expectations of your members or customers.

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What Credit Union Directors Need to Know about CUSOs

Whatever your credit union’s past experience with and impressions of CUSOs, credit union boards cannot afford to ignore the benefits CUSOs bring to credit unions today.  Successfully using CUSOs requires change, and while change is difficult, it is essential to meet the challenges posed by today’s world.

CUSOs help credit unions solve problems and leverage opportunities.  CUSOs are essential competitive tools for credit unions. Your competition is no longer just other credit unions and banks within your area code.  There are hundreds of financial service providers that are chipping away at your payments, loans and deposit services.   Many competitors have lower operating costs, sophisticated data bases, and slick technology that offer members convenient and efficient financial services at low costs.   How will credit unions successfully compete against bank and non-bank competitors that can deliver mortgage loans approvals in less than an hour and unsecured loans in less than a minute?  If credit unions cannot find ways to meet the increasing expectations of consumers on speed and convenience, the traditional credit union model is at risk of becoming an historic footnote.   Does your credit union have the scale, capital and expertise to build competitive technology delivery platforms on its own?  If not, how will you obtain scale, through merger or collaboration?  CUSOs are a means for credit unions to increase scale and remain independent credit unions.  If you are not using CUSOs to help your credit union compete in this hyper-competitive marketplace, you are putting your credit union’s long-term survival at greater risk.   The benefit of CUSOs is not abstract theory.  There are numerous examples of CUSOs that generate significant net income through either lower operational costs or additional revenue sources.  Time is of the essence. Credit unions can no longer afford to say that they will get around to using CUSOs “some day”.

Decide what functions are open to collaboration.  In deciding what functions are open to collaboration, the board should decide first what functions you want to retain as exclusive functions of the credit union.   Many credit unions say they want to retain member-facing functions and everything else is open to the consideration of a collaborative solution.  Some credit unions may even consider some collaborative member facing functions such as call centers.  So decide for yourself what functions are open to the consideration of a collaborative solution (your “Collaboration Zone”).

Develop a collaborative mindset.  The collaboration model is a very powerful one but only if you are all in.  If the function or service is within your Collaboration Zone, consider joining an existing successful CUSO (you can find CUSOs offering the product or service you need using NACUSO’s CUSO Analyzer tool).  If that is not available, then consider the advantages and feasibility of creating a CUSO.  To effectively leverage the benefits of CUSOs, there will have to be changes.  If you expect the benefits to be significant, it is likely the changes in your credit union’s business model will have to be significant.  But for those credit unions willing to fully leverage CUSOs, the benefits to the credit union and its members can be substantial. It is not a coincidence that the most highly successful credit unions have multiple CUSO relationships.

Credit unions should develop policies on managing the CUSO relationships. Today’s credit union has multiple service provider relationships which include CUSO relationships.  Good vendor management requires policies on how to select, contract with and monitor the service providers.  Likewise, having a policy on the factors to consider when investing is CUSOs is desirable.   Creating a staff position to manage the third party and CUSO relationships is a highly recommended best practice.

As owners, credit unions should organize CUSOs and their credit unions to meet the business objectives of the CUSO.  If you are organizing a CUSO to grow scale to lower operational costs, obtain increased expertise and obtain leverage in vendor negotiations, you will need to make changes to make that happen.  A CUSO has to be given the authority and resources to be successful for the credit union owners.  These changes may mean that a credit union may share control of critical services with other credit union owners, a credit union may transfer ownership of IT licenses to a CUSO, and credit unions may have to significantly change its own internal operational processes to work efficiently with the CUSO.  You can learn how other credit unions have successfully done this by talking with credit union leaders who have developed successful collaborations/CUSOs (NACUSO’s annual Network Conference is an excellent venue to meet these collaborative leaders).

Letting go to grow.  Credit unions sometime start operational services CUSOs as solely owned and later decide to admit other credit union owners.  Additional credit union owners add capital and business to grow scale.  Additional scale can result in lower per credit union operating costs and more efficiencies that benefit all credit union owner/users, including the original owner credit union.  While a CUSO can serve non-owner credit union clients, larger credit unions that bring significant scale usually prefer/require a co-ownership position, especially if the operational service is a critical service where a credit union wants partial control over the services.  The tension is how much control is the original credit union owner willing to give up to attract and retain other significant owners?  If the CUSO is to attract large credit unions that bring scale, the original credit union owner will have to give up complete control of the CUSO and share control with the other owners.  If the shoe were on the other foot, the original credit union owner would want shared controlled of a CUSO providing a critical service.

IT ownership.  If the CUSO provides IT services, a CUSO that owns the IT license is much more attractive to potential credit union owners.  Why would a credit union want to pay significant capital and receive critical IT services from a CUSO that does not own the IT license and the improvements made by CUSO?  If the CUSO owns the license and the improvements, the value of the CUSO as an investment is greater and that increase in value can be reflected in a higher capital amount for the CUSO investment on the investing credit union’s books.  I note that the value of an IT license held by a credit union for its own benefit does not have any capital value.   If the CUSO ceases to do business, the CUSO can distribute the license rights to all of the owners so each credit union can use the IT moving forward and any improvements made by the credit union owners after disbursement will be part of the IT owned by that credit union.  In the unlikely event that creditors are not fully paid by the CUSO upon dissolution of the CUSO, the CUSO can either (a) sell the IT license to a third party with the proviso that the owners may also use the IT on a non-exclusive basis or (b) one or more of the owners can buy the IT license to pay the creditors.  The IT license agreement can provide these options.  The point is that credit unions can protect the ownership and control of the IT license when the IT license is transferred to the CUSO.

Credit union owners in a multiple-CU owned CUSO are in a relationship and not a transaction.   Trust and respect are the coins of the CUSO realm.  Find CEO’s and boards who you trust and respect.  Understand that perfect foresight and planning is not possible and it is normal to make periodic adjustments in the CUSO and business plan as circumstances change.  As long as the owners have the same goals and view the benefits in the long term, all will be well.   This means that the CUSO goals have to be discussed and agreed upon by the owners prior to joining the CUSO.

 

Guy A. Messick the CUSO Guru, is an attorney with Messick, Lauer & Smith in Media, Pennsylvania and General Counsel to the National Association of Credit Union Service Organizations.  www.cusolaw.com

 

 

Advocacy Updates

Report on Advocacy Fund spending… NACUSO Working for You

Through the support of our members and partners, NACUSO raised approximately $273,000 in contributions toward its Advocacy Fund (and predecessor Legal & Litigation Fund) over the past 3 years.  The goal of the two funds together are to enable NACUSO to conduct crucial advocacy work on behalf of CUSOs and their credit union owners / partners.

In keeping with our commitment to be fully transparent and to regularly communicate our usage of these dollars (we provided detail of how the funds were spent from 2014-2015 last year, which is also included in the attached Report), we would like to provide you with the following information, which was provided in detail to each contributor in the first quarter of 2017.  NACUSO spent the following amounts from the Advocacy funds during 2016:

$24,000     Dollar Associates, LLC - paid for advocacy work with Congress and NCUA on CUSO issues
$24,000     Messick & Lauer, P.C. - paid for advocacy work with NCUA and meetings with Congress on CUSO issues
$   718     Travel to Washington DC for meetings with Congress and NCUA
$48,718    Total amount spent influencing Congress and NCUA for favorable CUSO environment

The remaining funds, out of the total $273,000 in combined contributions, equal $110,323.  This represents the balance in Restricted Cash as of 12-31-16, as per the NACUSO Advocacy and Legal Fund Analysis report (click link below).

The NACUSO Board and its Legislative & Regulatory Advocacy Committee is continuing to prioritize the advocacy of a regulatory environment that is pro-CUSO and pro-collaboration within our industry.  NACUSO needs your support for this initiative and to accomplish its purposes.  While strategies may change over time based upon circumstances and opportunities to advance the cause of CUSOs, the necessity for funding of such initiatives is essential if NACUSO is going to remain in a position to impact the decision-making process for CUSOs and the credit unions that invest in, or utilize them.

Click to Contribute

For a summary of how NACUSO has worked to maintain an environment that is supportive of collaborative investment, the following report entitled NACUSO Working For You (see below) provides a summary of the work we have done on your behalf.  To capsulize some of its key points, a summary of what we feel are the NACUSO “wins” this past year are:

  • Effectively opposing the costly extension of Vendor Authority to NCUA.
  • Worked with NCUA on the revised MBL Rule.
  • Advocating for the expansion of CUSO powers to originate loans credit unions are authorized to make, to help bring scale and expertise benefits to credit unions in all loan categories.
  • Encouraged NCUA to be transparent in its budget and rule making including the OTR calculation.
  • Working with NCUA to minimize adverse impact of the CUSO Registry and to correct the acknowledgements initially in the Registry.

To emphasize the last bullet above, initially, in its first version of the CUSO Registry documentation that CUSOs were required to submit with their data to NCUA in 2016, the agency’s acknowledgement form required CUSOs – when submitting their data – to accept responsibility under regulations that only apply to credit unions but were not intended to, apply to CUSOs.  These acknowledgments, if left unchallenged and signed by CUSO officials, could have exposed CUSOs to potential penalties under regulations that do not, and were never intended to apply to CUSOs.  Upon becoming aware of this inappropriate acknowledgement requirement, NACUSO worked directly with senior NCUA staff to bring our concerns to their attention.  NCUA agreed to the NACUSO position and made the needed changes to the acknowledgements for the CUSO Registry data submission process.  In addition, for those CUSOs who had already submitted their registration and signed the acknowledgements, NACUSO developed a letter with the appropriate wording for those CUSOs to send to NCUA to clarify this acknowledgement concern.

Effective advocacy requires ongoing diligence in following every aspect of regulatory requirements impacting CUSOs and the credit unions that invest in them and benefit from them.  It necessitates prompt response at times and the ongoing resources to interact positively on behalf of the CUSO community on issues and requirements of all types.  With a new Congress now in session, educating them on the benefits of credit unions and the collaborations that enable them to cost effectively serve their members, as well as invest in innovation, through CUSOs that help spread and minimize risk, is an important message we are delivering.  We hope that you agree such diligent advocacy initiatives are crucial to the long-term viability of the collaborative movements within the credit union community.

We hope this report helps you see how we have carefully managed the funds entrusted to us, for Advocacy purposes.  We would be happy to answer any questions that you may have.  Thank you for your support, and for giving NACUSO the opportunity to support you as you serve your members.  Please consider adding your support to our advocacy efforts by contributing today.

View NACUSO’s 2016-17 Advocacy Plan 

View NACUSO’s Advocacy & Legal Fund Analysis

 

Best Regards,

Jack M. Antonini
President & CEO
NACUSO
Jack@nacuso.org

NACUSO Working For You

Legislative & Regulatory Advocacy Update

Vendor Authority

Knowing that obtaining vendor authority was the number one legislative issue for NCUA in 2015-16, Jack Antonini and Guy Messick met with key Congressional representatives in January to tell Congress why credit unions and CUSOs oppose the extension of this expansive, costly and unnecessary authority to NCUA.  When NCUA made their official request for vendor authority, Congress was not persuaded by their arguments.

We continue to monitor the situation to ensure that the Senate and House recognize that such an unwarranted extension of regulatory and examination authority beyond the current statutory mandate of NCUA is both controversial in the industry and potentially damaging to an industry that is dependent upon third party relationships because of their smaller size in comparison to many of their competitors.  Credit unions need third party support and collaborative innovation to continue to effectively meet their members’ needs, and a burdensome regulatory and examination regime for anyone who does business with a credit union will not foster that support and innovation.

NACUSO is focused on protecting credit union collaboration through CUSOs, but we need your help, so we can continue to be vigilant in monitoring legislation in Congress, please contribute to NACUSO’s Advocacy Fund today – click here to contribute.

NCUA’s MBL Rule

NACUSO was supportive of the positive changes in NCUA’s revised MBL Rule, including the greater authority to waive personal guarantees, a more balanced approach to construction loan limitations, enhanced flexibility on counting loan participations against the MBL cap and the improved treatment of 1-4 dwelling rental property.  NACUSO also, in consultation with our business lending CUSO members, recognized that the Conflict of Interest provisions in the new MBL Rule could be misconstrued by examiners, so we have engaged with NCUA Board members and senior NCUA staff about the issue, and sent a letter to explain our concern and our recommended solution (see NACUSO’s MBL Conflict of Interest Letter to NCUA ).

Expansion of CUSO Authorized Powers

NACUSO wrote to the NCUA Board in 2015 requesting an amendment to NCUA Regulations Part 712.5 to add to the list of authorized CUSO powers to help facilitate a competitive solution to the growing Internet and peer-to-peer lending competitors for car loans and unsecured loans faced by credit unions in today’s environment (see NACUSO’s letter).  Chairman Matz responded that she was not opposed to reconsidering new authorities for CUSOs, indicating “if CUSOs can legally provide additional services to benefit credit unions and their members without compromising safety and soundness, I would strongly support those efforts.”  Chairman Matz went on to say that she had asked NCUA staff to review the policy and safety and soundness considerations relative to our request, and this review is already underway (see Chairman Matz response).

NACUSO has since asked the NCUA Board to consider updating the CUSO powers to align CUSO loan support with the loans credit unions are authorized to provide to their members  (see NACUSO’s 2017 Expansion of CUSO Authorized Powers Letter to NCUA), so CUSOs can bring scale, risk mitigation and expertise benefits to credit unions in all loan categories, not just those listed in the regulations.  While we explained the reasons for updating the NCUA Rules and Regulations Part 712.5 defining the permissible pre-approved activities a CUSO may provide, we also referred to our advocacy efforts to have auto loans and consumer loans added to the list of CUSO activities over the past two years, and the support that NCUA has communicated regarding those efforts.  We respectfully submit that now is the time to update the CUSO regulations to clarify that CUSOs are authorized to assist credit unions with any loan type that credit unions are authorized to make.

Update on CUSO Rule Implementation

Pursuant to the CUSO Rule the NCUA adopted in November 2013, CUSOs have been required to report certain information directly to NCUA pursuant to the agreement with their investing credit unions.  NCUA built an on-line reporting system that went live in the first quarter of 2016, and CUSOs updated their CUSO Registry information in the first quarter of 2017.

NACUSO continues to work with regulators minimize the regulatory burden on CUSOs and to help credit unions realize the maximum benefit from collaboration through CUSOs.  We work to ensure regulations affecting credit unions and CUSOs are as favorable as possible, but we need your help to continue this regulatory advocacy work, please contribute to the NACUSO Advocacy Fund today.

NACUSO Supported Transparency on OTR

NACUSO has long expressed its concern about the growth of NCUA and its extension of its regulatory arm, both directly and indirectly, into areas of questionable statutory authority such as the de facto regulation and examination of CUSOs through the 2013 CUSO Rule.  The extension of regulatory authority by NCUA comes with increased costs, costs that are paid for ultimately by credit union members.

NCUA takes money from the insurance fund to pay for its operations through the Overhead Transfer Rate (“OTR”).  The OTR currently funds approximately 70% of NCUA’s budget.  NCUA does not have to justify its expenses or ask permission from anyone to take as much money as it deems appropriate from the share insurance fund for its operations.  Fortunately, under new leadership, NCUA has decided to be more transparent as part of its budget process and publish details of how it calculates the OTR.

NACUSO 2016-17 Legislative & Regulatory Advocacy Plan

As we explained when we announced the formation of the NACUSO Advocacy Fund two years ago, the regulatory climate that enabled credit unions to maximize the benefits of CUSOs and collaboration is under siege, and as an industry, we need to respond.  NACUSO established an Advocacy Fund to supplement its efforts to promote and protect a collaboration/CUSO friendly regulatory climate.

At the 2016 NACUSO Annual Conference, we shared our 2016-17 NACUSO Advocacy Plan, based upon the four basic precepts upon which our advocacy work is based.  Those four pillars are designed to support an environment that:

  • Encourages credit unions to deliver a better member experience and improve the financial well-being of members
  • Encourages credit unions to seek new collaborative ways to serve members needs
  • Rewards investment in innovation and collaboration
  • Supports the use of CUSOs as the incubators for collaboration and innovation so that credit unions can reap the benefits of entrepreneurialism without direct risks

The Advocacy Plan also identifies the key associational positions that NACUSO is focused on, for the benefit of CUSOs and their credit union owners, which are summarized as follows:

  • Supports the development of clear examination guidelines that recognizes that NCUA has review powers and not examination powers over CUSOs. Such guidelines would inhibit de facto regulatory creep that would treat CUSOs as regulated entities that would discourage innovation and collaboration. NACUSO will intervene with NCUA in the more egregious cases if the CUSO or the investing credit unions request NACUSO’s assistance.  NACUSO opposes any legislative efforts by NCUA to gain statutory authority to directly regulate and examine CUSOs through an unnecessary expansion of the agency’s examination authority over credit union vendors
  • NACUSO supports the modernization of the permitted CUSO Services list to include all loan types that credit unions can originate to help bring scale benefits as well as risk mitigation and expertise benefits to credit unions
  • NACUSO will encourage regulators to view innovation and collaboration as an essential part of a revitalized credit union model and adapt their regulations and supervision to encourage the responsible and prudent development of the collaborative model

Key strategies for accomplishing the NACUSO 2016-17 Legislative and Regulatory Advocacy Plan are detailed in the Advocacy Plan.  In order to have a maximum impact upon the regulators and the industry, CUSOs and their credit union owners must stand united as we promote the unique collaborative opportunities and risk sharing benefits that our CUSOs provide.   Together, our participation in collaboration advocacy efforts through NACUSO will be our most effective way of impacting the future regulatory environment under which CUSOs operate.

NACUSO will focus its advocacy efforts on those issues most critical to the CUSO community as a whole and will attempt to avoid watering down its message on key issues by taking public positions on all issues that may impact CUSOs or credit unions in a more indirect manner.

In the current environment it has become increasingly important for credit unions to find new sources of non-interest income in order to enhance earnings, build capital, and support member growth.  Thus, collaboration and innovation are more critical now than ever before to create sustainability for the credit union movement.  NACUSO educates the industry as a whole (CUSOs, credit unions and other providers) on the benefits of collaboration and innovation, facilitates cooperative business opportunities, and provides leadership on how to implement these strategies within a favorable legislative and regulatory environment.

It is the desire of NACUSO to be recognized as an effective organization in support of building a favorable legislative and regulatory environment through what we consider the four pillars of future credit union success – collaboration, innovation, growth and entrepreneurship.  NACUSO will be balanced in approach, but bold in action to aggressively promote this agenda and will seek to join with other like-minded organizations, when appropriate, to work in collaboration with NACUSO to see these key agenda items accomplished.

All of the organizations associated with the NACUSO Board of Directors have already made contributions to the NACUSO Advocacy Fund.   We urge you to add your collaborative voice to NACUSO’s advocacy efforts.  Please complete the commitment form today, and send your contributions to NACUSO so we can help you.  Please share with your friends in the industry who want to ensure a bright innovative, collaborative future for our industry and our members.  If you or your industry friends are not yet members of NACUSO, now is the time to join, and be part of the collaborative solution.  If you have questions about the NACUSO Advocacy Fund, click the link to go to the NACUSOAdvocacy Fund FAQ’s.

Thank you very much for your support, and for giving NACUSO the opportunity to serve you as you serve your members.  It is a privilege that we truly appreciate.

Sincerely,

Jack M. Antonini
President & CEO
NACUSO
Jack@nacuso.org

Jack M Antonini
President & CEO – NACUSO
jantonini@aol.com  (713) 208-0989
NACUSO’s 2018 Network Conference April 16-19 at Disneyland Resort in Anaheim, CA
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NCUA Meeting Provides CUSO Guidance 6/16/16

NACUSO Visits NCUA to Discuss the CUSO Registry and CUSO Reviews

On June 14, Jack Antonini, NACUSO President and Guy Messick, NACUSO General Counsel met with NCUA Staff on the results of the CUSO Registry and the thinking on how CUSO Reviews will be handled.

The CUSO Registry sign-up period and the follow-up by NCUA found there were approximately 900 CUSOs.   NCUA believes that there are more CUSOs that have not reported.  Under the NCUA Regulations (Part 712.1(d)), “A CUSO also includes an entity in which a CUSO has an ownership interest of any amount, if that entity is engaged primarily in providing products or services to credit unions or credit union members.”   So these subsidiary CUSOs are considered CUSOs and required to make annual reports to NCUA.   The NCUA staff believes that many CUSOs were not fully aware of this requirement and there are a number of subsidiary CUSOs that have not reported.   NCUA will be following up with CUSOs to obtain these filings.   NCUA is also scrubbing the data and asking for clarification if the data is indicating that there may have been a reporting error. (more…)

Report on Advocacy Fund spending…NACUSO Working for you

Through the support of our partners, NACUSO raised approximately $63,000 in contributions toward its Legal and Litigation Fund in 2014 with a primary purpose to develop strategies for the most effective way to seek the repeal and/or mitigation of the impact of the CUSO Rule that NCUA had adopted in November 2013.  Subsequently, NACUSO established an Advocacy Fund to supplement the Legal and Litigation Fund.  The goal of the two funds together were to enable NACUSO to coordinate legal decision making, with a crucial advocacy component that will have more impact than the always risky option of legal action.  In total, $190,600 was contributed to the NACUSO Advocacy Fund.  Combined these two related initiatives received total contributions from NACUSO partners of approximately $253,600 in 2014 and 2015.

In keeping with our commitment to be fully transparent and to regularly communicate our usage of these dollars, we would like to provide you with the following information.  NACUSO spent the following amounts from the two funds during 2014 and 2015:

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CUSO Registry Clean Up Period 4/22/16

As most of you know, all CUSOs are obligated under the NCUA Regulations to register certain information directly with NCUA on an annual basis.   Over 800 CUSOs did so in February and March.   NCUA is now in the process of making sure all CUSOs have registered.   Their new deadline is April 30.  They are taking CUSO information from the credit union 5300 call reports and sending out letters reminding “CUSOs” that they have to register.   Some credit unions may have incorrectly listed a company as a CUSO.  Other credit unions list their CUSO but use an acronym for the CUSO instead of the CUSO’s full name.   NCUA, not knowing better is sending letters to any and all companies listed on the call reports. (more…)

Regulatory Update 3/15/16

Letter to NCUA regarding CUSO Registry Acknowledgement: Yesterday, NACUSO informed you of a change we negotiated with our General Counsel (Messick & Lauer) with the NCUA regarding the CUSO Registry Acknowledgment each CUSO is required to agree to when submitting their CUSO registration in the NCUA’s CUSO Registry system.  As we pointed out in our Regulatory Alert yesterday, the acknowledgment required CUSOs to agree to be bound by statutes that only apply to credit unions and which imposed penalties that are not applicable to CUSOs.

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Change to the CUSO Registry Acknowledgement 3/14/16

During the process of assisting with CUSO Registry questions, it came to our attention that in order to complete the CUSO Registry, CUSOs were required to agree to be bound by statutes that apply to credit unions and which imposed penalties that are not applicable to a CUSO.  On behalf of NACUSO and the many CUSOs in this industry, Messick & Lauer (NACUSO’s General Counsel) have advocated and negotiated to revise this acknowledgement to more accurately describe the duty of CUSOs to respond to the CUSO Registry.  It is a contractual duty with the credit union and not a direct regulatory obligation to NCUA.   As NCUA continues to pay more attention to CUSOs, NACUSO will continue to take action to be the voice of CUSOs and to resist any attempts at regulatory overreach.  The NCUA has changed the acknowledgement text.  For your reference, the text of the previous and current CUSO Registry acknowledgments are below. (more…)

Regulatory Update 2/26/16

NCUA’s CUSO Registry Training & Demonstration webinar held on February 11 is now available to be viewed.  If you missed the webinar, or want to view it again, to help you in completing the CUSO Registry, you can watch it by clicking on the following link:  View 2/11/16 Webinar. You have until March 31, 2016 to complete your initial registration of all CUSOs.