Northwest Credit Union Association Urges NCUA to Withdraw CUSO Proposal
September 27, 2011
September 27, 2011
In a Sept. 21 letter to the National Credit Union Administration (NCUA), the Northwest Credit Union Association (NWCUA) called on the NCUA to withdraw its recently-proposed rule, which would grant the NCUA unprecedented access to credit union service organizations (CUSOs).
Acknowledging that “a few bad actors can taint perception and cause undue panic and regulatory overreaction,” the comment letter, written by NWCUA Director of Regulatory Advocacy Jaycee Winn, went on to state that the proposal has gone beyond powers given by Congress, saying, “NCUA should not try to gain these powers through regulation, citing general safety and soundness principles, when that authority has been so clearly denied legislatively.”
The NCUA cites concerns for risks to the National Credit Union Share Insurance Fund (NCUSIF) as the impetus for the proposed regulations. In its letter, the Association urged the NCUA to enforce current safeguards rather than imposing further regulatory burdens, saying, “NCUA has the ability to take action to resolve any safety and soundness concerns that might be brought on by a CUSO relationship as well as the ability to require divestment and prohibit vendor relationships in those situations.”
The NWCUA also noted the potential drain on resources that such a rule would pose. Because of the diverse products and services provided by CUSOs, the NCUA would have to prepare for myriad new areas of oversight, a process that “would take hundreds of hours and be a significant budget drain in a time of an annual exam cycle and an already steady stream of new examiners.”
Further, the NCUA’s proposal has the potential to put credit unions’ NCUSIF coverage in jeopardy. This becomes a very high-risk proposition, and though credit unions are rightfully tasked with performing continual due diligence with regard to their relationships with CUSOs, threatening their NCUSIF coverage “based on the actions of business partners is stepping far beyond what is reasonable” and is far too punitive.
The Association understands the need for—and strongly supports—thorough and ongoing third-party due diligence when forming partnerships and choosing vendors but believes this proposal is an overreaction to concerns generated by a small number of CUSOs and goes beyond what is necessary and beyond congressional intent.
The Association will continue to follow and keep members updated on this very important issue.
Questions? Contact Director of Regulatory Advocacy Jaycee Winn: 503.350.2209, firstname.lastname@example.org.