NEWPORT BEACH, Calif.—The National Association of CUSOs is pressing Congress to rein in NCUA after the agency testified that it’s “number-one” objective in 2015 is seeking greater authority over vendors.
“NACUSO believes that NCUA already has all the legal authority they need to oversee CUSOs, and granting additional authority to NCUA will only increase costs to the credit unions that will ultimately have to pay the price for the additional oversight NCUA performs of hundreds, if not thousands, of vendors in a wide variety of industries,” the organization said.
As part of an Advocacy Fund it created in 2014, NACUSO said it has sent representatives to Washington to be actively engaged with Congress to advocate its position with members of both the Senate Banking Committee and the House Financial Services Committee.
In a statement, NACUSO said that “instead of suggesting how NCUA can help meet the growing need of credit unions and credit union service organizations (CUSOs) to reduce unnecessary regulatory burdens, NCUA took the opportunity to ask Congress for additional regulatory authority. We learned with great interest from NCUA’s testimony that the Agency’s number-one legislative priority in 2015 is to obtain Congressional authority to dramatically expand the Agency’s statutory authority to enable NCUA to directly regulate and examine all CUSOs and third-party vendors that do business with credit unions. This will give NCUA new powers over thousands of non-credit union organizations. This sweeping expansion of regulatory authority is at odds with the Senate Committee’s stated goal of reducing regulatory burdens that drive-up the costs of financial services.”
NACUSO said it does “not understand” why NCUA would “take the risk of asking Congress to open the Federal Credit Union Act for this purpose since history has demonstrated that direct regulatory powers over CUSOs is not needed in order for NCUA to protect the safety and soundness of the credit union system. NCUA already has all the ability, though their regulation of the credit unions that are the owners of CUSOs, to see what CUSOs are doing and to enforce their will upon CUSOs.”'
Advocacy Fund
In 2014 NACUSO created what it is calling an “Advocacy Fund” with money provided by its members and third-party vendors to help lobby in Washington. It has retained a lobbying firm to communicate to Congress its opposition to NCUA’s plans, and NACUSO said its leadership has visited the offices of key House and Senate members on the respective banking committees to advocate NACUSO’s position.
“NCUA’s lack of congressional authority to regulate CUSOs has not hindered NCUA from amending the CUSO Regulation in November 2013 to require CUSOs to directly report to NCUA certain information on an annual basis,” NACUSO said in its statement. “As can be seen by this history, NCUA has always had the power to see exactly what a CUSO is doing and can clearly see that CUSOs are producing considerable savings through collaborative risk sharing and significant non-interest income.
“Only 22 basis points of credit union assets are invested in CUSOs – hardly a systemic risk,” the organization continued. “And there have been very few CUSO failures. We would submit that, where there have been occasional CUSO failures, they did not result from a lack of NCUA authority over third-party vendors and CUSOs – but rather a failure of NCUA to effectively utilize the authority the Agency already has under existing law and regulation.”
NACUSO is calling on Congress to “seriously vet” the underlying facts being used by NCUA to support its position.
“Innovation is never fostered in a highly regulated environment and NACUSO fears that the direct regulation of CUSOs will smother the ability of credit unions to share risk and utilize CUSOs to experiment and innovate,” it said. “Without a compelling reason for additional regulation, no additional regulatory authority should be granted NCUA to directly regulate CUSOs and third-party vendors beyond that already available to them – which is considerable.”