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NACUSO requests clarity on Texas CUSO proposal
AUSTIN, Texas (5/27/11)--The National Association of Credit Union Service Organizations (NACUSO) joined with the Texas Credit Union League in filing a comment letter Monday opposing proposed state regulation of Texas credit union-owned credit union service organization (CUSOs). NACUSO told the Texas Credit Union Commission that its primary objectives are protecting the ability of CUSOs to bring added member services and non-interest income, lower costs through economies of scale achieved by collaboration, and sharing the cost and risk of innovation among several credit unions. Innovation costs to obtain the expertise to introduce new products and services “can be prohibitively expensive for an individual credit union, and yet affordable when shared with several credit unions through a CUSO,” the letter said. Therefore, NACUSO said it is concerned about the commission’s recent proposal in Subsection (g) stating: “All legal limitations imposed on a credit union by Texas Finance Code, Title 3, Subtitle D and any rules adopted under that Subtitle, apply equally to CUSO activities.” “It is our belief that this would not be good public policy for the State of Texas,” said NACUSO’s letter. “We are uncertain of the full implications of the proposal. Will CUSOs have the same powers and limitations of credit unions? What is meant by the term ‘limitations’? If the intent is to subject CUSOs to the same regulatory restrictions and supervisory authority as those facing credit unions, this is a serious departure from the current powers in every other state that regulates credit unions and the federal authority of the National Credit Union Administration (NCUA). “There is no jurisdiction in the U.S. that restricts CUSOs to those permissible activities only credit unions are permitted to perform,” the letter added. “NCUA does not have regulatory authority over CUSOs but has expressed a desire to petition Congress for that authority. Even NCUA does not seek to have CUSOs confined to permitted credit union activities. What is the value of CUSOs if they become mere shadows of credit unions? There would be little need for CUSOs as the risk, presently being often shared through collaboration via a CUSO, would now be taken back within the credit union seeking to innovate or offer an expanded service. Frankly, it would not be an overstatement to characterize the proposed action in Texas as a radical departure from the norm.” Because the commission already has the ability to inspect a CUSO’s books and records, the commission already can compel a CUSO to take action that is in the best interests of credit unions if the CUSO poses a safe and soundness risk to credit unions, NACUSO said in the letter. That power includes the ability of the commission to issue a cease-and-desist order “to prevent credit unions from using the services of the CUSO and/or requiring the owner credit unions to divest their investment in the CUSO.” NACUSO also said it has concerns about a proposal limiting a credit union’s investment in a CUSO to 15% of net worth, because it could have a “chilling effect on new CUSO investment.” The organization also questions the commission’s proposed 20-day notice required if a CUSO makes a material change in its organizational structure or performs a new activity. NACUSO said more clarity is needed on what the changes would entail. The letter concludes that it would like the commission to revisit the proposal. To read the letter, use the link.
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