Bankers call on NCUA to withdraw proposed CUSO rules
Banking trade groups have called on the NCUA to end its plans to enact rules that would allow CUSOs to expand their lending services.
In comments submitted to the agency, the American Bankers Association and the Independent Community Bankers of America said the NCUA does not have the authority to expand services and any expansion would pose risks to the Share Insurance Fund.
And they asked that the proposed rule be removed from the review.
In January, the NCUA board passed a proposed rule that would expand the types of activities CUSOs perform. The proposed rule would allow CUSOs to make any type of loan that a federal credit union can obtain and would give the agency board more flexibility in determining the legal activities of CUSOs.
Numerous comments from bankers echoed the reaction of NCUA board chairman Todd Harper. At the time the proposed rule was presented to the board, Harper, a Democrat, was not president. Republican Rodney Hood was president and he and fellow Republican Kyle Hauptman voted to seek comment on the plan. Harper voted against.
Harper said the rule would allow CUSOs to become indirect auto lenders and payday lenders, adding that the NCUA does not have the power to oversee organizations to comply with consumer protection laws.
“I would like to examine why we are even considering this proposal today. It’s certainly not related to COVID, ”he said at the January meeting. “There is no economic analysis to justify expanding this unfettered lending authority.”
He added: “Why are we spending our time and our precious staff time on another proposition that is not ready for prime time?”
Hauptman and Hood voted in favor of the proposed rule, while Hauptman said it was “unfounded” that CUSOs would do anything to harm members of credit unions.
In comments submitted to the NCUA board of directors, Timothy Keehan, vice president and senior advisor to the American Bankers Association, wrote that between 2008 and 2015, nine CUSOs caused more than $ 300 million in losses. to the Equity Insurance Fund.
“We believe the proposal unduly broadens the range of lending activities permitted for CUSOs,” he said.
And Keehan agreed with Harper that the proposal was rushed.
“Inexplicably, (the) NCUA has not undertaken or provided an economic or regulatory impact analysis to assess the proposal against these critical risks,” he wrote. “This omission, among other concerns, prompted the NCUA board chairman to question, criticize and ultimately commit to voting against the proposal.
Keehan said the proposal should be withdrawn until the NCUA is allowed by law to oversee CUSOs and until the agency performs an economic analysis to determine its impact on the equity insurance fund. .
In his letter to the agency, Michael Emancipator, ICBA’s vice president and regulatory adviser, said the proposed rule would severely deregulate CUSOs without implementing the appropriate safeguards.
He also noted that the agency does not have powers of review and control over organizations.
“This lack of scrutiny and oversight presents a significant regulatory blind spot for the credit union industry; and if (the) NCUA finalized this proposed rule, it would exacerbate the existing problems that arise from the inability to oversee CUSOs, ”he wrote.
He warned that if the NCUA insists on adopting a final rule, the ICBA intends to ask the Financial Stability Review Committee to investigate whether “CUSOs pose a systemic risk to NCUSIF and whether prudential oversight of CUSO is justified. ”
Prior to joining ICBA, Emancipator was the Senior Regulatory Affairs Advisor for NAFCU.
It’s unclear when – or even if – the NCUA board of directors will vote on a final rule. Hood said last month the board had a backlog of proposed rules that could be voted on to finalize them. He called on Harper to work with members of the Republican council to reach a bipartisan deal.
Harper said he would.