Credit union subsidiaries – better known as “credit union service organizations” (CUSOs) – will be able to originate any type of loan that a federal credit union (FCU) may originate under a final rule approved Thursday by the federal credit union regulatory agency’s governing board.
The National Credit Union Administration (NCUA) final rule, without substantive change from the proposed rule, was approved 2-1 by the board, with its chairman dissenting. Effective 30 days after publication in the Federal Register, the final rule also authorizes the agency board to approve additional permissible CUSO activities and services.
With the inclusion of any type of loan an FCU can originate, the list of permissible loans by CUSOs is expanded from only business loans, consumer mortgage loans, student loans, and credit cards to also include automobile and small-dollar (payday) loans – the two types of loan the NCUA has said would likely draw the newest involvement by CUSOs.
Unlike the federal banking agencies, the NCUA Board has no direct supervisory authority over the subsidiary organizations in which credit unions may invest or to which they may provide loans. While seeking to regain the authority (which it held many years ago), it some years back issued a final rule that requires the credit unions it supervises to include provisions in their contracts with CUSOs that give the NCUA access to any books and records of the CUSO and the ability to review the CUSO’s internal controls.
The NCUA said it received more than 1,000 comments on the proposed rule, and it noted that the response from credit unions specifically was not unanimous.
Thursday’s vote on the final rule – with Chairman Todd Harper (the lone Democrat on the board) voting against adoption, and Vice Chairman Kyle Hauptman and Board Member Rodney Hood (both Republican) voting in favor – mirrored the vote taken in January when the board issued the proposed rule (before Harper was designated chairman). Hauptman and Hood were able to force inclusion of the final rule on Thursday’s meeting agenda through action taken in September.