News & Highlights

NACUSO Spotlight on Gene Fredriksen

Gene Fredricksen, CEO NCU-ISAO

Gene Fredriksen, CEO NCU-ISAO

Each month we are highlighting at least one NACUSO member with an interview style format that is meant to be fun and informative. This month our focus is on NACUSO’s newest member, the National Credit Union – Information Sharing and Analysis Organization (NCU-ISAO)

What’s your current position and can you give me a brief overview of what it is you do in your work?

I am the CEO and Executive Director of the National Credit Union – Information Sharing and Analysis Organization. (NCU-ISAO).  This is a not for profit specifically targeted at helping the Nations Credit Unions accelerate their cyber maturity and build resilient systems to support their members.

What would you say most motivates you to do what you do? What are you most excited or passionate about? 

The credit union model of people helping people is an incredible culture.  It is this culture upon which the ISAO is founded and operates. Credit Unions are an integral part of the communities in which they exist, and a critical financial resource to the members they serve.

I want to hear the story of how you came to work with credit unions. What attracted you to work for NCU-ISAO?

I learned about the CU culture while working at PSCU, a CUSO located in St. Petersburg Florida.  While I came to PSCU to work in financial services, I quickly recognized the magic of the Credit Unions and their interaction with the communities.

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Credit Union Survey Reveals Current Burdens and the Need to Share Services

In an effort to learn more about the changing credit union landscape and key issues of executives, CU Service Network partnered with Edge (Kordeleski) Consulting to compile a comprehensive survey on Shared Services and pain points. Sixty credit unions in the Rocky Mountain and Plain States, ranging from $30M to $1.6B total assets, participated in the survey.

One question in particular illustrated the increasing pressure on credit unions and the need for collaboration-mindedness. The question referenced top issues facing credit unions in the next five years, and how critical each of those issues were to the participating credit union based on a scale of “completely agree” to “strongly disagree.” The issues were as follows:

  1. Compliance Burden
  2. High Expense Ratio
  3. Loan Growth
  4. Skills Shortage
  5. Membership Growth
  6. Cyber Security
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Freedom of Choice by Guy Messick

freedomAmericans love freedom of choice, be it in cereals, cars or financial services.  When I began representing credit unions, the consumer protection philosophy was to give the consumer information and let the consumer make their own informed decision.  That is how we got Regulation Z and APR disclosures.   The concept is that people have the right to make their own choices but the government can require the financial services providers to state the terms of their loan offerings in a manner that enables consumers to compare offerings (the “Knowledge Approach”).

The CFPB takes a different philosophical approach.  The CFPB has so tightly defined the terms of financial products; it is now in the business of prescribing which financial products may be offered. The burden is on the financial services provider not the consumer to determine if the consumer is financially able to repay a loan.   The CFPB’s world view seems to be that all lenders are actual or potential predators; a pack of wolves ready to pounce.  The public are sheep who do not have the ability to analyze and make good financial decisions on their own.  Therefore the CFPB must prescribe which financial products the providers will be permitted to offer (“Restricted Market Approach”).

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Words of Wisdom from Ronald Reagan

Here’s a summary of the possible election impact from former NCUA Chairman Dennis Dollar:

“There is no doubt but that the Trump victory, coupled with the Republicans retaining control of the House and Senate, will bring about changes at both the NCUA and the CFPB.  If history holds true, it is likely that Trump will make the sitting Republican board member McWatters into NCUA Chairman shortly after he is sworn in.  The second board member nominated in 2017 will be another Republican, probably much more aligned with McWatters than with the Matz and Metsger approach at NCUA.  That change, coupled with Metsger’s term expiring in August 2017, will have an impact on the second FOM regulation and likely the supplemental capital issue as well.  Both are much more likely to move under a Chairman McWatters.

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Cubs Win! Cubs Win! Why should I care?

I was born and raised in Portland, Oregon. Not a big sports town. In fact, the only major sports team, the Trail Blazers won their last championship when I was still in high school (the 70’s).

ct-cubs-indians-world-series-game7-photosMy mom and dad didn’t play sports, we all played musical instruments. Our family didn’t even watch sports, or much TV for that matter. We listened to music. So, not a big sports fan. Until this last October. You see, my husband was born and raised in rural Illinois. His father drove a UPS truck for almost 25 years. They were a blue collar big family living in the same house for their entire childhood in a really small town. They played sports beginning in grade school, they watched their beloved Cubbies on television and occasionally could make the 3-hour trip to Wrigley Field and see them in action.

So last night, when the Cubs made history, broke the curse of the goat and finally brought a World Series trophy back to Chicago after 108 years, I got a little misty-eyed. With all of my years of therapy I started to psycho-analyze my sudden devotion and emotion to something I have no history with. Why did I care so much?

And it comes down to this. Legacy, honor, loyalty, family memories…..common bond.

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NACUSO Spotlight on Scott Collins, President of Xtend

Each month we are highlighting at least one NACUSO member by interviewing one of their executives. The format is meant to be fun and informative. This month we are excited to share the story of Xtend. Enjoy!

PART ONE: Life Story and Experiences

What’s your current position and can you give me a brief overview of what it is you do in your work?

xtend_fancy1I am the President of Xtend, a multi-owned CUSO headquartered in Grand Rapids, Michigan.  Xtend’s core business is providing shared resources to credit unions and developing relationships with industry partners that are looking to expand their markets in the mid-market space.  As the senior executive, my responsibilities are centered on developing and driving our vision, providing mentorship to my staff and ensuring the Board of Directors and Management are in synch tactically and strategically.

What would you say most motivates you to do what you do? What are you most excited or passionate about?

We started our CUSO 14 years ago by tossing $60K into a hat with a goal to build something special that could help credit unions survive, and even thrive in a consolidating market.  Now that we are a successful company approaching 75 employees, I am motivated by two things:  looking for that next disruptive innovation that we can bring to our mid-market customer-owners, and leading a group of credit union professionals, a significant number being millennials, to work on the business plans of those customer-owners.

It might sound a bit Pollyanna-ish, but having the opportunity to work with credit union professionals on a daily basis, both internally and externally, and wearing a bunch of hats in the process – mentor, peer, business partner and friend – keeps me motivated on the business side.  On the personal side, spending time with my family (wife of 29 years and three sons in college) and friends when everyone’s busy lives afford us that opportunity, are moments I cherish.  Time spent golfing, fishing, hunting and camping top that list.

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The CFPB, Credit Unions and Fines

imageThe CFPB fined Navy Federal Credit Union $5.5 Million as a civil penalty for violations related to collection efforts and $23 million as compensation to members who were subject to collection efforts that were allegedly contrary to applicable regulations.   This got me to thinking, what is the purpose of CFPB fines?

Some would argue that the fines are a form of punishment.  “Make the bastards pay.”  The sentiment was widespread among many Americans after the financial meltdown when no one was held accountable.  I have to admit that the notion has some emotional appeal to me.  There are people who were bad actors and designed business models that preyed upon the public and deserve to face at least a fine for their egregious conduct.   However, I do not see Navy Federal Credit Union as a predatory institution that needs a dose of vigilante justice.   Navy has the heart and soul of a true credit union that cares deeply about the financial well being of its members.   Navy Federal Credit Union did not cause the last financial melt down and will not cause the next financial melt down.  They will never be on the “get-even” list.

Some would argue that fines are a deterrent to financial service providers to not repeat bad behavior.   The theory goes that if a bank is fined, that will cut into the profits and upset the shareholders who will take up their pitchforks and make the board and management behave better.   Even if you accept this reasoning, I don’t see how that theory applies to a credit union.   The irony of the Navy fine is that in its zeal to protect the members of Navy Federal Credit Union, the CFPB is taking money from the very members it says it is protecting.   All the money in credit unions belongs to the members.  There are no profits going to “fat cats.”  So if you fine a credit union, it is the members who pay.

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The CFPB and My Fifth Grade Government Class – by Guy Messick

schoolhouse-clipartIn my fifth grade, I learned about checks and balances in our democracy.   This country was founded on the then revolutionary principle that the people are free and the people grant their government with limited rights for limited purposes.  The fear of an overreaching government is why our founders created a government with multiple checks and balances; to prevent a branch of government from making up rules without the input and consent of the people and their representatives.   When Congress created the CFPB, they forgot those concepts.

The CFPB is run by a single administrator who is appointed to a five year term and answers to no one.  The current administrator was never confirmed by Congress.  The CFPB funding comes from the Treasury Department not from the Congress.   The people’s representatives have no supervisory powers over the CFPB, an agency that Congress created to pass rules consistent with the authority granted by Congress.  Unfortunately Congress was a bit vague with the grant of authority. The CFPB exploited that vagueness to give itself the power to regulate conduct in every type of consumer financial service.  Congress gave the CFPB the keys the car and an unlimited credit card and like an entitled teenager, the CFPB is driving anywhere it wants to go.

Other financial regulators pass regulations that are first offered for public comment and then published as final regulations so that the financial institutions understand the “rules of the road” and can act accordingly.   The CFPB makes many of their new rules by ambush.   They and they alone decide among themselves what is fair and not fair.   They then give notice to a financial service provider that they are acting in a manner they determined is unfair to the consumer.   Through litigation and the mere threat of litigation, new standards of conduct are imposed.  If their new rules impose higher costs on a financial service provider that drive up the costs to consumers or adversely impact the financial integrity of a financial services provider, they do not care as they are “on the side of the angels” and will impose their view of the world on all of us no matter what the costs or consequences.

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Advocacy Updates

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.

Regulatory Update 2/1/16: NCUA’s CUSO Registry Opens Today

Credit unions and credit union service organizations can now get additional guidance on NCUA’s CUSO Registry from a new agency website page. Registration for the CUSO Registry opens today and continues through March 31. The new website page explains the agency’s requirement that CUSOs report information directly to the agency if they wish to work with credit unions and provides links to related resources available to help those completing the registry. You can link directly to the CUSO Registry from the resources page.

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