Written by JiJi Bahhur, Director of Regulatory Compliance
During last week’s open board meeting, the National Credit Union Administration (NCUA) took several important actions, including unanimously approving the final Credit Union Service Organization (CUSO) rule.
Effective June 30, 2014, the final CUSO rule will require CUSOs to annually provide basic profile information to the NCUA and the appropriate state supervisory authority. CUSOs engaging in certain complex or high-risk activities, such as credit lending, information technology and custody and investment management, will be required to report more detailed information, including audited financial statements and general customer information. The reporting burden is on the CUSO, not the credit union, but credit unions will need to update their written CUSO agreements to include the new requirements in the final rule.
“Other provisions of the new rule include:
- Extension, for consistency, of sections of the current CUSO rule, which currently apply only to federal credit unions, to all federally insured credit unions. A CUSO must agree to:
- Account for its transactions in accordance with generally accepted accounting principles;
- Prepare quarterly financial statements; and
- Obtain an annual financial statement audit by a licensed certified public accountant.
- A new requirement that CUSOs must agree to report information directly to NCUA and to the state regulator, as applicable. CUSOs that offer complex or high-risk services—like credit and lending; information technology; and custody, safekeeping and investment management services—must report more detailed information, including financial statements and general customer information.
- Any subsidiary in which a CUSO has an ownership interest in any amount will be subject to the rule if the subsidiary is primarily engaged in providing products or services to credit unions or their members.
A requirement that a state-chartered credit union that is or would be rendered less than adequately capitalized by additional investment in a CUSO must obtain approval from its state regulator and notify an NCUA regional director prior to making the investment.”
CUSOs will begin submitting reports to NCUA under new section 712.3(d)(4) when NCUA’s reporting system becomes fully operational by December 31, 2015.
You can find the final CUSO rule here. Also note, NAFCU’s Regulatory Affairs staff will issue a Final Regulation summarizing the key aspects of this rule. Once it is available, it will be located here.
Other actions taken during the open board meeting include:
- An announcement that federally insured credit unions will likely pay no Corporate Stabilization Fund assessment in 2014;
- Approval of a budget of $268.3 million to fund NCUA’s activities in 2014, including no increase in authorized staffing levels;
- Approval of a decrease of 18.4 percent in the 2014 federal credit union Operating Fee scale that also exempts 303 credit unions with assets below $1 million; and
- Approval of a 2014 Overhead Transfer Rate of 69.2 percent to fund the Share Insurance Fund’s activities.