NCUA Amends the CUSO Rule
At the October 21, 2021 Meeting, the NCUA Board amended the CUSO Rule to enable CUSOs to make all types of loans a credit union can make and a means for NCUA to add additional CUSO powers without going through a lengthy regulatory amendment process. CUSOs could previously only make business loans, student loans, mortgage loans, and credit card loans. Now CUSOs can also make auto and unsecured loans. There was no logic or policy reason to exclude auto and unsecured loans from CUSO lending powers.
Why is this rule change so important? One reason is that more and more loans are being sourced on the Internet at the point of sale and the membership requirement for credit union borrowers slows the lending process too much. Credit unions were being frozen out of the Internet lending market. Since CUSOs are able to have a minority of their customers be non-members, CUSOs can close the loans without a membership requirement, locate a credit union where a borrower is already a member or eligible for membership, complete the membership process, and sell the loan to the credit union.
NCUA recognized that regulation must keep up with the changing times. That is why the Board created a process to amend the permitted services section without going through a formal and lengthy rule making process.
The amendment was passed on a 2-1 basis with Board Member Rodney E. Hood and Vice-Chair Kyle S. Hauptman voting in favor of the amendment. They will both be attending the NACUSO Conference in Las Vegas beginning November 8, 2021. NACUSO looks forward to expressing our appreciation for their support.
NACUSO has advocated for this amendment for over six years. It has taken the hard work of NACUSO’s Regulatory Advocacy Committee and several members of NACUSO. A great deal of credit goes to Dennis Dollar of Dollar Associates for his sage advice in the advocacy efforts.
This is a huge win for credit unions and the CUSOs that serve credit unions!
The key changes to Section 721.5 are as follows:
(q) Loan origination, including originating, purchasing, selling, and holding any type of loan permissible for Federal credit unions to originate, purchase, sell, and hold, including the authority to purchase and sell participation interests that are permissible for Federal credit unions to purchase and sell; and
(r) Other categories of activities as approved in writing by the NCUA and published on the NCUA’s website. Once the NCUA has approved an activity and published that activity on its website, the NCUA will not remove that particular activity from the approved list or make substantial changes to the content or description of that approved activity, except through formal rulemaking procedures.