Regulatory Advocacy Member Report

In addition to networking and education opportunities, NACUSO very highly prioritizes regulatory advocacy for its members.  NACUSO is committed to protecting a regulatory climate that fosters innovation and collaboration in the credit union industry.  The Board of NACUSO is laser focused on that goal and recognizes that the regulatory environment CUSOs operate under is much more determined in the board room at NCUA, in the state supervisory authority offices and in the director’s suite at CFPB than in the halls of Congress.

While NACUSO actively works when necessary on congressional issues such as opposing the extension of unlimited third party vendor regulatory and supervisory authority to NCUA, our Board continues to emphasize that NACUSO’s priority continues to be focusing on those regulatory bodies that most directly affect CUSOs – the NCUA and state credit union regulators.  In addition, we closely monitor other regulatory bodies that can affect certain business services provided by CUSOs.  For example, the CFPB can affect mortgage lending services and the SEC can affect investment services.

NACUSO has a strong and active Regulatory Advisory Committee (“RAC”) consisting of NACUSO Directors and representatives of NACUSO Members.  Dennis Dollar, former NCUA Chairman and Principal Partner at Dollar Associates LLC, provides the consultative and strategic advice to the RAC on all regulatory and supervisory matters.  Jack Antonini, Guy Messick, Brian Lauer and RAC members join Dennis Dollar and his team in advocating with the regulators.  Guy Messick has advocated for NACUSO for over 30 years, Brian Lauer for over 12 years, and Jack Antonini for over 7 years.  Dennis Dollar served as a CEO of the credit union now known as Gulf Coast Community Federal Credit Union from 1991 to 1997, was appointed to the NCUA Board in 1997 and served as Chair of NCUA from 2001 to 2004.  Dennis was voted the most influential credit union leader in the past twenty-five years by the readers of the Credit Union Times.  Together this team has made a tremendous impact on the regulatory environment for CUSOs and is recognized at NCUA and in state regulatory offices as effective advocates for CUSOs.

NACUSO representatives have effectively met and had influence with every NCUA Board Member since 1987.  NACUSO has long lasting relationships with the senior staff of NCUA.

NACUSO also has strong relationships with state credit union regulators.   NACUSO works closely with NASCUS.  NACUSO attends the annual meeting with NASCUS to discuss CUSO related issues with the state credit union regulators and present the winner of the Next Big Idea competition.

NACUSO’s advocacy work is carried out through face-to-face meetings, comment letters from NACUSO and encouraging members to submit comment letters.  These actions have often resulted in favorable modifications to regulations.   The following is but a sample of NACUSO’s positive efforts over the years on the regulatory and supervisory front.

In 1993 Guy Messick met with NCUA Chairman Norman D’Amours to convince NCUA to permit credit unions to enter into loan participations for loans that were closed and already on the books of the seller credit union. NCUA responded favorably on this significant regulatory change that had not been permitted prior to this NACUSO initiative.

In 2002 NACUSO General Counsel Guy Messick was asked by CUNA to serve on its committee to liaison with the Securities and Exchange Commission on the transition issues for credit union investment services programs caused by the adoption of the NCUA Incidental Powers Regulation and its effect on the Chubb Letter.  The committee regularly interacted with SEC representatives, as well as coordinating with NCUA on the incidental powers regulation into which NACUSO had considerable input.

In 2007 NACUSO’s advocacy helped prevent the issuance of Virginia state CUSO regulations that were much more restrictive than NCUA’s CUSO Regulations.

In 2008 NACUSO successfully worked with NCUA to bring about an amendment to the CUSO Regulation to modernize the Regulation including adding additional permitted services.

In 2009 NACUSO provided advice to the Washington Credit Union League on proposed state CUSO regulatory changes. Washington State requires that regulators seek input from impacted stakeholders prior to implementation of new regulations.  Viewing NACUSO as a key stakeholder and voice for regulations affecting CUSOs, the Washington State credit union regulator reached out to NACUSO in 2014 to comment upon proposed state CUSO regulations being considered at that time.

In 2010 NCUA issued Letter 10-FCU-03 which applies to investment services.  NACUSO’s direct advocacy and subsequent letter to NCUA about certain potentially restrictive aspects of that Letter resulted in a much needed clarification letter by the NCUA General Counsel that was beneficial to credit unions and CUSOs providing investment services.

In 2011 NACUSO advocated and commented officially on proposed changes to the Texas state CUSO regulation amendments that resulted in favorable changes to the final regulation for CUSOs.

In 2013 NCUA issued a Supervisory Letter regarding personal guarantees on business loans that was impacted by NACUSO advocacy.  Also, in addition, NCUA proposed extensive amendments to the Member Business Lending Regulation in 2015 that would have considerable impact on business lending CUSOs.  NACUSO worked closely with the business lending CUSOs to advocate their positions on these and other business lending issues and, through these direct efforts with NCUA, helped to help shape the business lending regulation we have today.

In 2013, in a process that had started in 2011, NCUA proposed an amendment to the CUSO Regulations requiring CUSOs to directly report to NCUA.  Despite considerable advocacy with NCUA that such a regulation was potentially beyond the statutory authority of the agency, NCUA proceeded with the regulation.  In response and with the support of the NACUSO Board and members, NACUSO sought and obtained the legal opinion of a prominent DC law firm on the issue of whether NCUA has the authority to require CUSOs to directly report to NCUA under the Federal Credit Union Act.

While the law firm concluded that the agency was on questionable legal grounds and that there was certainly a reasonable prospect for success if NACUSO elected a lengthy and costly legal challenge to  NCUA’s  authority in issuing the CUSO Regulation, it was determined by the NACUSO Board that the time, resources and cost of  litigation could not be justified and that NACUSO would take the alternative route of aggressively and actively attempting to influence NCUA in its implementation of the CUSO Regulation and its reporting requirements.  Working with NCUA, there has been considerable interaction with NACUSO that has resulted in changes and improvements to the reporting regime.  NACUSO continues to advocate on behalf of its members with NCUA on the scope of CUSO reviews in general and, when needed, addresses with NCUA issues that arise in specific CUSO reviews.

In 2014, as a part of its risk-based capital (RBC) proposal, NCUA stated its intent to risk rate CUSO investments in the RBC risk calculations at a totally unjustifiable weight of 250 basis points.  This would, in effect, codify in the calculations that any credit union investment in a CUSO would be penalized by additional capital retention requirements at a rate two and a half times the risk weight of most other assets on a credit union balance sheet.  This would have resulted in a potentially paralyzing blow to the ability of many credit unions to invest in CUSOs.  In perhaps the most extensive and aggressive advocacy effort in its history, NACUSO advocated hard for a reduction from 250 basis points to the final regulation’s incorporation of a risk weight of 100 basis points and was successful in this crucial effort.

Guy Messick and Jack Antonini, on behalf of NACUSO, have met with congressmen, senators and their staffs in opposition to the NCUA proposal to extend to the agency the authority to directly regulate and supervise all credit union vendors – including CUSOs.     Dennis Dollar has supplemented this effort with his own congressional and senatorial contacts.  In 2015, with the leadership of NACUSO, both CUNA and NAFCU joined in a coordinated effort to send a letter and strongly advocate to Congress that NCUA vendor authority not be added as a last minute amendment to an unrelated piece of legislation.   This effort resulted in the withdrawal of the proposed amendment, and NCUA’s efforts to expand their direct regulatory and supervisory authority over all credit union vendors – including CUSOs – were thwarted.

NACUSO has since 2016 advocated directly and aggressively with NCUA to expand the CUSO powers to include the power to make all the types of loans a credit union can make.  Currently CUSOs can only make student loans, business loans, mortgage loans and credit card loans.   In meetings with NACUSO representatives, NCUA Board Chairman McWatters and Board Member Metsger both expressed support for the proposal.  As there is a scheduled wave of regulatory relief measures currently under consideration at NCUA, NACUSO will continue to work with the board members and the NCUA staff in an effort to ensure that this expansion of CUSO authority is included in the first wave of regulatory relief changes when they begin.

With the support of our members, it is the position of the NACUSO Board that, as the primary voice for CUSOs and the credit unions that invest in them, NACUSO has never been stronger than it is today.  Its record of producing results for CUSOs and the credit unions that invest in them is unparalleled by any other organization that might focus on credit union issues in general – but not specifically for CUSO issues as does NACUSO.  We hope that you agree with us that NACUSO members receive good value for their dues.  A part of that value is for ongoing regulatory advocacy, and targeting legislative advocacy when needed that we believe is second to none.  We always strive to keep you, our NACUSO members, aware of our efforts on your behalf.  If you have any questions or comments on this update, please do not hesitate to contact us.

Jack M. Atonini, President
Jack Antonini signature

March 8, 2018