Effective CUSO due diligence: four steps

Conducting thorough, up-front due diligence is critical for ensuring a smooth and beneficial working relationship with a lending credit union service organization (CUSO).

Here’s where to start:

1. Investigate the CUSO’s track record and lending philosophy

In your earliest conversations with the CUSO’s management, you’ll want to ask some probing questions, such as:

• How many loans has the CUSO underwritten?
• How many have gone delinquent?
• How many have resulted in a charge-off loss to the originating or participating credit unions?

What has the CUSO learned from these experiences? Has it changed its lending philosophy or underwriting policies and procedures as a result?It is important for your credit union’s lending philosophy and risk profile to be in line with the CUSO’s. Otherwise, you’re asking for trouble.

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