Expanding CUSO Reach Makes Some Credit Unions Shudder

NCUA’s rush to expand the powers of CUSOs—the organizations that provide financial and operational services for credit unions—has many small credit unions wondering what the hurry is all about. The industry’s little guys risk losing business should CUSOs be allowed even more unregulated, untaxed, and unfettered access to consumers than they already have.

As the NCUA itself noted after CUSOs nearly brought down the credit union system with risky lending, inadequate capital, and lax oversight during the 2008 financial meltdown: “CUSOs have caused credit unions more than $300 million in direct losses and led to failures of credit unions with combined assets of more than $2 billion.”

CUSOs, which represent groups of credit unions to offer financial services such as loans to consumers, operate with the special tax exemptions offered to credit unions by Congress, even as they often obliterate guidelines regarding the industry’s “common bonds,” such as field of membership. This allows them to grow their business based in part on taxpayer generosity.

If any of these CUSOs fail because they take on too much risk, others in the credit union industry will be on the hook. That’s one reason some are questioning why the NCUA, charged with oversight of the credit union industry, is proposing an expansion of CUSO power with only half the normal comment period—30 days rather than 60.

Below are comments from credit unions about the proposal:

O Bee Credit Union

“O Bee Credit Union is a State chartered credit union and has an investment in a local CUSO with other smaller local credit unions in our field of membership area. The voice of smaller credit unions was not or is not being heard. The ability of a larger federal credit union(s) being able to expand a CUSO will create an unlevel playing field.”

Larry Ellifritz – Consolidated Community Credit Union

“This is a request, if passed, will ironically have a negative impact on the very credit unions that supported CUSOs like CUDL and place an inordinate amount of control over the auto loan market with one organization. The unintended consequences are vast with this legislation.”

Lone Star Credit Union

“There are already companies looking for credit union partners that originate solar loans, renovation loans, boat and airplane loans, etc.”

CU Direct

“With the proposed inclusion of automobile and unsecured loans to the list of pre‐approved CUSO activities, credit unions will now have parity with state-chartered credit unions and banks, as well as new FinTech companies, and have the opportunity to work with national lending websites to serve credit union members… For example, under the proposed regulation, CUSOs could aggregate market opportunities to make loans via retail websites (e.g., Costco, Autotrader, LendingTree,, Home Depot, Lowe’s, etc.) collectively “National Lending Websites.”

We at Reform Credit Unions ask: Is NCUA ready to repeat history? If past is prologue, NCUA should give all parties much more time to comment on these proposed changes. The last thing our economy needs is to risk running off the rails by shoving regulatory changes through without adequate time to consider their impact.

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