NCUA Presses Case for CUSO Exam Authority

NCUA may be a day late and a dollar short in pressing for the authority to regulate credit union service organizations (CUSOs).

Speaking at the National Association of Credit Union Service Organizations annual convention in Las Vegas, NCUA Board member Gigi Hyland argued that NCUA needed the statutory authority to examine credit union service organizations (CUSOs).

Ms. Hyland asserted that if NCUA had this authority it could have stemmed the losses associated with lending and operational troubles arising from credit unions relationships with their CUSOs.

Credit Union Times quoted Ms. Hyland regarding losses at Texans CU arising from its business lending CUSO as saying: "We could see things were going wrong but we had to go through the side door and through the maze to get there. By the time we got there, it was too late."

Unfortunately, I'm afraid that NCUA is seeking to close the barn door after the horses have already left the barn.

The Government Accountability Office recommended in 2003 that the agency seek the same legislative authority as the other banking regulators to examine third party vendors.

In 2004, NCUA Chairman Johnson requested that Congress grant the agency the authority to examine third-party vendors and even provided draft legislative language; but Congress never acted on this request.

The agency should have never approved allowing CUSOs to originate business loans in 2003 when it knew it did not have the authority to directly examine business lending CUSOs.

It is very troubling that NCUA during the last decade expanded the range of activities that could be offered by CUSOs, especially given the fact that the agency could not examine these entities.