Compliance Blog

Written by Benjamin M. Litchfield, Regulatory Compliance Counsel

Greetings compliance fans! Today begins the initial registration period for NCUA's CUSO Registry. The CUSO Registry is the online system through which credit union service organizations (CUSOs) will report information directly to NCUA. Some of you may be wondering what impacts the CUSO Registry will have on federally insured credit unions and what resources are available for compliance officers. This blog post covers some of these issues, while providing some background for those of you who may be new to this issue.

For those of you who may be new to compliance or may need a refresher, prior to investing in or lending to a CUSO, federally insured credit unions must obtain an agreement from the CUSO that it will submit annual reports directly to NCUA and, if applicable, the appropriate state supervisory authority. See, 12 C.F.R. 712.3(d)(4). Newly formed CUSOs must file a report within 60 days of formation. Starting today, these reports will be submitted through NCUA's CUSO Registry.

All reports must contain the same basic registration information:

• The CUSO's legal name;

• Tax identification number;

• Address;

• Telephone number;

• Web site;

• Primary point of contact;

• Services offered;

• The name(s) and charter(s) of credit union(s) investing in, lending to, or receiving services from the CUSO; and

• Investor and/or subsidiary CUSO(s).

CUSOs engaged in complex or high-risk activities such as lending, information technology, custody and safekeeping, or investment management services for credit unions must report additional information specified in NCUA's CUSO Rule. See, 12 C.F.R. 712.3(d)(4), (5). Credit unions are prohibited from making new loans to CUSOs that fail to satisfy the annual registration requirement and will be examined for compliance with the CUSO Rule.

The rule makes clear that the obligation for the credit union is to obtain an agreement from the CUSO that it will register with NCUA prior to investing in or lending to the CUSO. The rule does not require the credit union to register the CUSO with NCUA. Instead, the credit union is required to monitor the CUSO to ensure that it has fulfilled its contractual agreement to register on the CUSO Registry.

A few weeks ago, NCUA issued Letter to Credit Unions 16-CU-02 (Jan. 2016), discussing the CUSO Registry and providing credit unions with some resources that may be useful for meeting the compliance obligations of the credit union. Some highlights from this letter include:

• A reminder that the CUSO regulation applies to all levels, or tiers, of a CUSO's structure. This means that any subsidiaries in which the CUSO has an ownership interest are treated as CUSOs if they are engaged primarily in providing products or services to credit unions or credit union members.

• A notice that beginning today, CUSOs can access the CUSO Registry and related training materials at https://cusoregistry.ncua.gov. Credit unions and CUSOs can also find additional information, including FAQs, the CUSO Registry User Manual, and several quick guides on the CUSO Registry landing page here.

• Some important dates to keep in mind:

• February 1, 2016 CUSO Registry registration window opens for CUSOs

• March 31, 2016 Registration window closes for CUSOs

• June 1, 2016 CUSO Registry search function becomes available to all credit unions and the public.

The full text of the letter can be found here. Additional information on credit unions' responsibilities when involved with CUSOs can be found here and here.

***

DMDC Extends MLA Database Deadline. In response to a letter sent by NAFCU and other financial trades, DMDC agreed to extend the deadline to seek direct access to the MLA database until February 15, 2016. If you have any questions about this deadline or the database, please email Brandy Bruyere, NAFCU's Director of Regulatory Compliance, bbruyere@nafcu.org.