NCUA issues guidance on expanding CUSO activities

by Justin White, NAFCU Compliance Blog

In an early February NCUA issued Letter to Credit Unions 23-CU-02, outlining risk factors linked to credit union service organizations (CUSOs) originating business, consumer mortgage, student, and credit card loans. NCUA emphasizes that a credit union’s risk due to these CUSO loans will depend on the relationship between CUSOs and credit unions. The guidance begins by introducing ways a credit union and a CUSO may interact.

  •  Lender – A credit union that lends funds to a CUSO, creating a debt relationship.
  • Investor or owner – A credit union that invests in a CUSO. The credit union may own all or a portion of the CUSO, establishing an equity relationship. Depending on the structure of the relationship, the credit union may be a shareholder, member, or partner.
  • Client or customer – A credit union that uses a CUSO’s services, or purchases products, including loans offered by a CUSO, constituting a vendor-client relationship.

NCUA lists the following risk factors as potential areas of concern when operating with a CUSO and lending: credit risk; strategic risk; compliance risk – applicable laws and regulations; fair lending; unfair, deceptive, or abusive acts and practices (UDAAP); reputation risk. This compliance blog will address these risk areas in that order.

 

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