The American Bankers Association today urged the National Credit Union Administration to withdraw a proposed rule that would expand the range of permissible lending activity for credit union service organizations, or CUSOs. The proposed rule would allow CUSOs to originate any type of loan a federal credit union may originate, including auto and payday loans. NCUA also proposed to broaden federal credit unions’ investment authority in CUSOs. As CUSOs may serve people who are not members of a credit union, the expanded authority would further undermine credit union field-of membership restrictions, which is one of the central justifications for their tax-exempt status.
ABA also raised concerns that the proposal would give rise to numerous safety and soundness and consumer protection risks, given that the NCUA has no examination or oversight authority over CUSOs and no mechanism exists to hold them accountable for unsafe and unsound practices or violations of federal consumer financial protection laws. The proposal would jeopardize the National Credit Union Share Insurance Fund, and potentially imperil retail borrowers, particularly those in underserved areas and low-to-moderate income communities, ABA noted.
The association urged NCUA to refrain from any CUSO-related rulemaking until it is given statutory authority to supervise and examine CUSOs; it performs an economic analysis to ensure safety and soundness risks can be addressed; and it withdraws—and refrains from taking any further action on—the proposal’s granting of authority to approve CUSO activities and services outside of the formal rulemaking process and broadening credit unions’ investment authority.
Bankers nationwide also responded to the proposal, submitting more than 600 of their own comment letters as part of an ABA grassroots campaign.