CUNA Comment Letter
Proposed Changes to NCUA's CUSO Regulation
March 1, 1999
Ms. Becky Baker
Secretary to the Board
National Credit Union Administration
1775 Duke Street
Alexandria, VA 22314-3428
Re: Proposed Changes to NCUA's CUSO Regulation
Dear Ms. Baker:
The Credit Union National Association appreciates the opportunity to file comments on the National Credit Union Administration's proposed amendments to its regulation on Credit Union Service Organizations, which appeared in the Federal Register November 30, 1998. CUNA represents over 90% of the nation's state and federal credit unions.
The NCUA proposed several changes to its credit union service organization (CUSO) regulation. The proposed changes would:
- allow a federal credit union to invest in or lend to a CUSO in which non-credit union depository institutions are co-investors or lenders;
- permit CUSO investments in non-CUSO service providers if the investment is limited to the amount necessary to participate in the service provider or a greater amount if necessary to obtain a reduced price for goods or services;
- allow a federal credit union to invest in the debentures of a CUSO structured as a corporation; and
- clarify that GAAP must be used for determining regulatory limits as well as for financial statements.
We believe the NCUA Board has made a concerted effort to improve its CUSO regulation. The Board made comprehensive changes in the regulation in March of last year, which we supported. However, the Board and staff have remained flexible regarding the CUSO rule and have responded to concerns that several provisions in the revised rule were problematic. We applaud the Board's approach to improving the CUSO rule and support the proposed amendments.
Section 712.5(d)(8) lists cyber financial services as a permissible CUSO activity, and cyber financial services are defined in the preamble as "credit union member financial services that are analogous to services performed for credit union members in a credit union branch and not unrelated services." The proposal does not make changes in this definition, but the agency is requesting comment on the scope of services that should be included.
We urge the agency to refrain from developing a laundry list of cyber services that would be permissible. Rather, we believe the better approach would be to allow federal credit unions to have the flexibility they need to respond to the demands of their members for such services. We encourage NCUA to provide a broad characterization of cyber financial services, such as " financial services performed for credit union members through electronic media," without listing covered services, which undoubtedly would need to be updated as market changes occur.
In a related development, CUNA's Payments Subcommittee, chaired by Stan Hollen, President of the Golden One Credit Union in Sacramento, California is reviewing what changes, if any, are needed in the regulatory framework involving home branching and delivery of payments. That study, which we plan to complete within the next several months, could be useful to the agency's review of cyber financial services for purpose of the CUSO rule. We will be pleased to share our findings with the Board when they are available.
Thank you again for the opportunity to comment on the proposed changes to the CUSO regulation.
Mary Mitchell Dunn
Associate General Counsel