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 is establishing an Advocacy Fund to supplement its efforts to promote and protect a collaboration/CUSO friendly regulatory climate. The following FAQ’s answer why we feel we need a CUSO focused Advocacy Fund and how the Advocacy Fund is intended to be utilized on behalf of CUSOs and their credit union owners.
In order to have a maximum impact upon the regulators and the industry, CUSOs and their credit union owners must stand united as we support the unique collaborative 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, from the impact of the CUSO Rule to the risk based capital requirement for CUSOs.
In order to raise sufficient funding for the Advocacy Fund we have provided suggested levels of contributions, but we want all our members to contribute at levels they can afford in order to maximize the percentage of CUSOs and their credit union owners NACUSO represents when negotiating with NCUA. Non-members are encouraged to contribute as well. A significant number of contributors, even if the amounts are small will be just as important to our collective mission as those who are able to give contributions of $25,000.
All of the organizations associated with the NACUSO Board of Directors have already made contributions or made commitments to contribute. 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, and please share with your friends in the industry who want to ensure a bright innovative, collaborative future for our industry and our members.
Jack Antonini, President & CEO
NACUSO Advocacy Fund FAQ’s
Why is NACUSO involved with regulatory advocacy?
Credit unions have a lot of money and strategic assets invested in CUSOs. CUSOs are a key part of the collaborative business model of many credit unions. A regulatory climate that inhibits innovation and collaboration puts those credit unions and CUSOs at risk. CUNA and NAFCU are supportive of our efforts but they have made it clear that on CUSO issues, they expect NACUSO to carry the ball – a responsibility we readily accept.
Why treat CUSOs differently from credit unions?
Innovation and collaboration are not fostered in a strict regulatory environment. CUSOs provide credit unions with the environment to test new ideas, and the opportunity to share the costs of development. When CUSOs are regulated like credit unions there are additional costs and restrictions that inhibit the ability of CUSOs to compete with non-CUSO service providers. The costs of credit union-like regulation over CUSOs is not only unnecessary as the investments of credit unions in CUSOs are already subject to NCUA supervision through the credit union examination process, but it is also an over-extension of NCUA’s authority beyond its statutory mandate to regulate and insure credit unions that also moves the agency into the realm of becoming the de facto Federal Trade Commission of the credit union movement.
What are the current concerns in the regulatory climate?
The regulatory climate is under threat due to (1) the introduction of an amendment to the CUSO Regulation that requires CUSOs to directly report information to NCUA despite the fact that NCUA admittedly does not have regulatory authority over CUSOs, (2) a dramatic increase in CUSO examinations which have the same scope and tone as credit union examinations, (3) the treatment of CUSOs as a systemic risk to the NCUSIF even though only 22 basis points of credit union investments have been made in the thirty-year old CUSO segment of the industry; (4) state credit union regulators increasing their authority over CUSOs owned by state chartered credit unions, (5) NCUA proposing a Risk Rated Capital Rule which weighs CUSO investments at a punitive 250%, and (6) NCUA lobbying Congress to provide it with direct regulatory authority over CUSO and third party service providers. NACUSO believes that these actions will have a chilling effect on collaborative options for credit unions and adversely affect the ability of CUSOs to provide innovative, collaborative, competitive and effective solutions for credit unions.
How has NACUSO responded to the CUSO Rule?
When the initial CUSO Amendment was proposed in 2011, NACUSO met with NCUA staff and advocated strongly with Board Members Fryzel and Hyland to defeat the passage of the Amendment as unnecessary. NACUSO led the industry in the drive to provide a significant level of comment letters to make an impression upon NCUA of the depth of the industry’s concerns. Approximately 290 comment letters were received and NCUA listened.
In 2013, a revised proposal was introduced and NACUSO again lobbied against it. The proposal was modified from the 2011 proposal to make the reporting requirement for CUSOs other than lending and IT services CUSOs less burdensome. However, NACUSO still had deep concerns over whether NCUA exceeded its statutory authority in requiring CUSOs to directly report information to NCUA and the adverse effect of the regulation on the competitiveness of CUSOs.
NACUSO hired a large Washington DC law firm experienced in challenging the government in rule making matters. NACUSO obtained a legal opinion that called into serious question the ability of NCUA to require the direct reporting of information to NCUA as well as direct examination by NCUA of CUSOs and the procedures NCUA used in passing the CUSO Regulation.
NACUSO has also hired the California Credit Union League’s Government Advocacy Staff to consult with members of Congress on the actions of NCUA against CUSOs and determine whether NCUA has support in Congress to obtain direct regulatory authority over CUSOs and third party service providers.
Could NCUA take further steps to regulate CUSOs?
Yes, if we are not prepared to push back and fight, NCUA could institute even more extensive reporting requirements and add additional oversight powers in the future. There does not seem to be any limit on NCUA’s ability to add to the CUSO Regulation and extending its authority over CUSOs, an authority that was never granted by Congress, and the additional information gathered through the 2013 CUSO Rule could help to facilitate those actions.
Is NACUSO going to sue NCUA over the CUSO Rule?
The short answer is that a final decision has not been made. Suing the regulator is a step that should not be taken lightly. We are in the process of discussing the industry’s concerns with NCUA and will evaluate their response.
Why do we need a NACUSO Advocacy Fund?
Today is a new day for CUSOs. NCUA has increased its efforts in Congress to regulate CUSOs. NCUA has stepped up its direct examination of CUSOs. There is no real difference in the scope of a CUSO exam and credit union exam in the minds of many of the examiners. Having a few meetings a year with NCUA is no longer sufficient to protect the regulatory climate for CUSOs. The pressures have increased and so must our response.
What will your CUSO do if NCUA continues to increase its reporting demands? How will your CUSO push back against an examination process that is excessive in time and scope? How will your CUSO respond if NCUA is successful in obtaining direct regulatory authority over CUSOs? You could go it alone or you can have the industry behind you through NACUSO. It is important to be ahead of the curve and establish the Advocacy Fund now before the full force of these changes is implemented.
How will the Advocacy Fund be used?
NACUSO will use the Fund to form and present its message to those who have the power to make the necessary changes to the regulatory climate. This includes the hiring of professionals such as attorneys, lobbyists, public relation specialists and economists. The Fund will also cover travel expenses of NACUSO representatives and industry leaders to meet with law makers and regulators.