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As the NCUA considers allowing credit union service organizations (CUSOs) to originate all loans that federal credit unions can originate, NAFCU's Aminah Moore offered the association's support but cautioned the agency against future efforts to permit additional CUSO activities without going through a transparent rulemaking process.

In addition, Moore, NAFCU's regulatory affairs counsel, encouraged the NCUA to reconsider its interpretation of the lending and investment authorities in the Federal Credit Union (FCU) Act.

"Investment in financial technology (fintech) should not be limited to investments in CUSOs," Moore wrote. "To remain competitive in a fintech landscape where larger banks can easily acquire startup talent and innovative products in their infancy, credit unions need the authority to invest as stakeholders in promising technology companies without needing to rely on the limited functionality of a CUSO to make strategic inroads with financial product developers.

"Due to the COVID-19 pandemic, credit unions are trying to figure out where to allocate their liquid assets. Because of their limited direct investment powers, credit unions are potentially missing opportunities to invest directly in innovative and beneficial new strategies that would serve members well and lead to additional growth and stability for the industry," she added.

NAFCU is leading efforts to ensure a level playing field between credit unions and fintechs engaging in banking activities. Association member Carlos Pacheco, CEO of Premier Members Credit Union in Boulder, Colo., earlier this month testified before Congress and stressed the importance of modernizing credit union regulations to keep up and compete with technological advances.

Addressing the intended objectives of the CUSO proposal, Moore said expanding CUSOs' lending abilities "will allow loans to remain in the credit union industry" and "will allow credit unions to capture lending activity that is increasingly occurring through digital channels." She also explained how the expansion would still support safety and soundness of the credit union industry.

However, Moore detailed NAFCU's opposition to the other component of the proposal to provide the NCUA with flexibility to expand other CUSO activities in the future without engaging in notice and comment rulemaking.

"This part of the proposed rule would frustrate the agency’s longstanding commitment to transparency in all important aspects of the regulatory process," Moore argued. "NAFCU supports reducing the regulatory burden and streamlining the approval process for additional CUSO activities and services but encourages the NCUA to rely on the rulemaking process before granting additional authorities."

Read Moore's letter here. NAFCU will continue to advocate for a modernized regulatory environment that allows credit unions to thrive.