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New and Expanded Reporting Requirements for CUSOs from the NCUA

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Randall L. Harbour
November 27, 2013

The National Credit Union Administration (NCUA) has issued its Final Rule on Credit Union Service Organizations (CUSO) reporting requirements and transparency.  It has also made the rules applicable to federally-insured, state-chartered credit unions as well as federally-chartered credit unions.  The Final Rule becomes effective June 30, 2014.  NCUA Letter No. 13-CU-13.

The NCUA has determined that it needs more, and more specific, information filed with it directly from the CUSOs on an annual basis. The Board notes that losses attributable to CUSOs have caused a number of credit union failures and resultant losses to the National Credit Union Share Insurance Fund. The Board acknowledges that it does not have direct statutory or regulatory authority over the CUSO itself, so it is requiring that the federally-insured credit unions (FICU) enter into an agreement (or amend the existing agreement) with the CUSO that compel the CUSO to provide the desired information.  Further, if a CUSO offers services deemed to be more complex or of higher risk to the credit union, then additional information will be required.

The basic information that will be required to be submitted includes the

  • CUSO’s tax identification number;
  • Legal name;
  • Address;
  • Telephone number;
  • Website address (URL);
  • Contact person;
  • List of services offered to the credit unions;
  • List the FICUs that invest in, lend to, or receive services from the CUSO;
  • And parent/subsidiary CUSO information, if applicable.

The following services are considered complex or high risk services that are offered to credit unions:

  • Credit and Lending
    • Business loan origination;
    • Consumer mortgage loan origination;
    • Loan support services, including servicing;
    • Student loan origination;
    • Credit card loan origination.
  • Information Technology:
    • Electronic transaction services
    • Record retention, security, and disaster recovery services;
    • Payroll processing services.
  • Custody, safekeeping, and investment management services for credit unions.

CUSOs offering the above mentioned complex or high risk services will also have to provide to the NCUA, on an annual basis, the list of services provided to each FICU customer; the investment, loan or level of activity of each FICU; and upload copies of the CUSO’s annual audited financial information.

Those CUSOs that offer the credit or lending services described above must also provide the:

    • Total dollar amount of loans outstanding;
    • Total number of loans outstanding;
    • Total dollar amount of loans granted year-to-date; and
    • Total number of loans granted year-to-date.

The NCUA is developing a registration system for CUSOs to use to upload and provide the required information.  The system is scheduled to be ready by December 31, 2015.

There are additional provisions in the Final Rule that require information to also be provided to the state supervisory authority (Michigan Department of Financial and Insurance Services), treatment of confidential information as excluded from the FOIA, etc.

If you have any questions regarding the new Rule, CUSOs generally, or other credit union matters, please contact Randall Harbour at rharbour@fosterswift.com or 248.539.9907.