Want a CUSO? Ask yourself these 2 questions first

Credit unions considering forming a CUSO should ask themselves two key questions, according to credit union attorney Guy Messick, who also serves as NACUSO’s general counsel. Messick shared the insight as the keynote speaker at CUProdigy’s Unite 2017 annual meeting Wednesday morning at the Hyatt Centric Resort here.

First, will the CUSO help solve a critical credit union problem? Messick urged attendees to think about what CUSO would be a game changer for the credit union, and provide the biggest bang for the buck.

Second, credit unions must compare the risk of capital and time involved versus the CUSO’s potential benefit.

“If you talk to credit unions that have formed CUSOs, most find that they take more time and resources than expected,” Messick said. He added that CUSOs that provide operational services pose less risk than financial CUSOs.

That said, CUSOs provide crucial non-interest income while requiring far less capital and risk
than in-house lending, he added.

Speaking of lending, Messick spoke about current regulations that need to be modernized to allow CUSOs and their credit union owners to be more success. At the top of the list was the NCUA regulation that forbids CUSOs from making auto loans; currently, CUSO’s can only provide operational back office lending solutions. The NACUSO attorney said if that regulation were changed, credit unions could better compete with non-bank lenders gaining market share. That’s because a CUSO wouldn’t be required to demand lenders meet field of membership requirements, and could sell the loans on the secondary market.

Unite 2017’s increased attendance reflects CUProdigy’s growth over the past year. Registrations increased this year by 55% over last year, to 130 attendees, according to CUProdigy CEO Anthony Montgomery. And, vendor exhibitors increased by 50% over 2016’s annual meeting.

The conference continues through Friday.

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