PARK CITY, Utah — Credit unions considering forming a CUSO should ask themselves two key questions, according to credit union attorney Guy Messick, who also serves as NACUSO’s general counsel.
Messick told CUProdigy’s Unite 2017 annual meeting here that the first question is, “Will the CUSO help solve a critical credit union problem?” Messick urged attendees to think about what CUSO would be a game-changer for the credit union.
The second question, he said, is “How does the risk of capital and time involved compare with the CUSO’s potential benefit?”
“If you talk to credit unions that have formed CUSOs, most find that they take more time and resources than expected,” Messick said.
He added that CUSOs that provide operational services pose less risk than financial CUSOs.
That said, CUSOs provide crucial non-interest income while requiring far less capital and risk than in-house lending, according to Messick.
Speaking of lending, Messick also told the meeting that current regulations need to be modernized to allow CUSOs and their credit union owners to be more successful. At the top of that list, he said, is an NCUA regulation forbidding CUSOs from making auto loans. Currently, CUSOs can only provide operational back office lending solutions. Messick said if that regulation were changed, credit unions could better compete with non-bank lenders gaining market share, since a CUSO wouldn’t be required to demand lenders meet field of membership requirements, and could sell the loans on the secondary market.
CUProdigy reported that Unite 2017’s increased attendance reflects CUProdigy’s growth over the past year. Registrations increased this year by 55% over last year, to 130 attendees, according to CUProdigy CEO Anthony Montgomery. And, vendor exhibitors increased by 50% over 2016’s annual meeting.