On Oct. 21, 2021, the National Credit Union Administration (NCUA) held its ninth open meeting of 2021, in which they approved a new final rule, with a 2-1 NCUA board vote, for credit union service organizations (CUSOs).
The newly-approved final rule expands the services and permissible activities for federal credit unions to invest in or lend to CUSOs. Previously, those activities were listed and limited to only four types of loans and had not been revised since 2008. Over 10 years later, CUSOs are now gaining the ability to originate any type of loan a federal credit union originates, as well as having greater flexibility when deciding on approval of permissible activities and services outside of notice-and-comment rulemaking. This will allow CUSOs to have a broader net of services for their consumers, while also reducing the regulatory burden of notice-and-comment rulemaking.
Proponents of the new rule indicate the extended activities will benefit smaller credit unions by allowing them to stay more current and competitive in the lending market, especially online. To mitigate risk, the new ruling does not eliminate the NCUA’s ongoing request for third-party vendor regulating authority from Congress, and federal credit unions and CUSOs remain bound to their lending and investment limit percentages.
The rule goes into effect 30 days after publication in the Federal Register. After those 30 days have passed, federal credit unions will have a larger scope of approved investments in CUSOs. Furthermore, CUSOs, investors and lenders will be able to submit unapproved activities for approval without a waiting period.
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