ALEXANDRIA, Va.–The issue of losses to credit unions and the NCUSIF as a result of CUSOs was again raised during the NCUA board meeting, this time with a few more details around how the agency arrived at the figures it has been citing.
The issue was raised during a vote by the NCUA board on a new final CUSO rule that grants credit union service organizations the authority to make any loan approved for a federal credit union directly to a member, bypassing the credit union itself.
The board passed the measure 2-1, with Chairman Todd Harper in the minority and expressing his “strong opposition” to the rule. CUToday.info has full coverage here.
Over the last year, Harper has made several references to “more than $300 million in losses” caused by CUSOs to the NCUSIF, including before Congress as he pressed for the agency to have third-party vendor oversight authority, which it currently lacks.
That figure has led to strong pushback from the National Association of CUSOs (NACUSO), which asked for details on where the figure has come from and further said NCUA is seeking to become the “de facto FTC.”
In addition, when asked earlier by CUToday.info for specifics related to those losses, an NCUA spokesperson said, “Due to the supervisory nature of the action, the NCUA is not able to comment on which CUSOs caused losses to which credit unions.”
Additional Insights
But during the board meeting NCUA staff provided a bit more insight into how it arrived at the figure, although it acknowledged it doesn’t track specific CUSO losses but rather losses from credit unions in which investments in CUSOs were a factor in a failure.
Agency staff said its calculations show at least 73 credit unions incurred losses due to CUSOs between 2007 and 2020, and that ultimately, the failure of 11 of these credit unions caused $305million in losses.
Vicki Nahrwold, supervisory risk management officer in the agency’s Office of Examination and Insurance, told the board it is “difficult” to arrive at an overall figure related to any CUSO-related losses, especially since a credit union may suffer financial losses due to a CUSO investment but if the CU itself doesn’t fail, the agency doesn’t track those negative numbers.
Nevertheless, during his comments at the board meeting, Harper said the number is actually larger than $305 million, saying, “When combined with the CUSO-caused losses at credit unions which did not fail, the total losses to the system were nearly $600 million.”
Harper did not provide any data on how he arrived at that figure.
Additional Losses Predicted
As CUToday.info reports separately, Harper said he believes the new CUSO authority will lead to additional losses for the share insurance fund.
“History may never repeat itself, but it often rhymes,” said Harper. “And when it does rhyme, it will be the surviving credit unions and their members who will pay for such losses."
Harper’s fellow board members, Kyle Hauptman and Rodney Hood, played down any such risks in the proposal.