Saying that the National Credit Union Administration’s current rule governing Credit Union Service Organizations is sorely outdated and hampers innovation, the two national credit union trade groups are calling on the agency board to finalize an updated regulation.
The NCUA has proposed a rule that would expand CUSO lending authority by allowing the organizations to originate any loan that may be made by a federal credit union.
“Credit unions, as member owned financial cooperatives, have a unique mission, and must continue to evolve to fulfill this mission,” Lance Noggle, the Credit Union National Association’s senior director of advocacy and counsel, wrote in a letter to the NCUA.
The rule was proposed while Republican Rodney Hood was chairman; Democrat Todd Harper, who became chairman when Joe Biden was sworn in as president, opposes the rule. It remains unclear when—or if—the rule will be brought to the board for a final vote.
Banking trade groups oppose the rule, saying that it exceeds the power Congress gave the NCUA and that the agency lacks the authority to properly supervise CUSOs. The two national credit union trade groups disagree.
Noggle said that the new lending authority would allow CUSOs to make loans that might be impractical for some credit unions to make. He added that keeping up with the services offered by well-funded technology companies and large banks is difficult for community-based financial institutions. In addition, he said CUNA supports a plan to allow the NCUA board to expand the services that CUSOs may offer without going through a formal rulemaking process.
Aminah Moore, the National Association of Federally-Insured Credit Union’s regulatory affairs counsel, noted that the CUSO rule has not been revised since the 2008 financial crisis. “Considering lending has progressed a great deal in 13 years and the nation is facing yet another financial crisis due to the COVID-19 pandemic, it is necessary for the CUSO rule to remain up to date with current lending practices,” Moore wrote. “Therefore, now more than ever, it is important that the CUSO rule be amended to keep credit unions innovative and thriving.”
Moore said, however, that NAFCU does not support giving the agency the flexibility to expand CUSO activities without going through the rulemaking process.