Credit Union Service Organizations (CUSOs)

Question 1

Why does NCUA feel it is extremely important that a federal credit union maintain corporate separateness from its CUSO by setting it up as a separate entity

Answer 1

NCUA wants to limit the credit unions liability of the credit union for any problems that may arise with the CUSO’s operation

Question 2

If the credit union plans to holly own the CUSO it does not have to set up a separate company, but can run the CUSO as a department of the credit union true or false

Answer 2

False the credit union must set up the CUSO as a separate legal entity

Question 3

The federal credit union act states that a CUSO must primarily serve the needs of its member credit unions what is meant by primarily serve

Answer 3

This means that the CUSO’s primary business must be with the credit unions that invest in or loan to the CUSO and the individual members of those credit unions there is no strict rule but NCUA examiners generally use a 50% or greater standard to determine primary services

Question 4

How does NCUA regulate CUSOs

Answer 4

NCUA indirectly, regulates CUSOs by limiting the activities they can become involved in

Question 5

Although the most common service provided by CUSOs is insurance NCUA provides a specific list of categories with an illustrative list of activities under each category that CUSOs may be involved in name four of these activities 

Answer 5

Allowable CUSO activities
Checking and currency services, clerical, professional and management services, consumer mortgage, loan services, electronic transaction services, financial counseling, services fixed asset, services, insurance, brokerage or agency leasing loan, support services record retention, security and disaster, recovery services, security brokerage services, shared, credit union branch operations, student loan, origination travel, agency services, trust and trust related services, real estate brokerage services And investment in non-CUSO service providers

Question 6

NCUA rules do not dictate how much overlap can occur between the CUSO and the credit union what are some of the good judgment rules the credit union can establish to maintain the separate entity requirement

Answer 6

Good judgment rules
Credit union board members should make up only a minority of the CUSO board

The CUSO board and the credit union board should meet at different times

Shared employees should have different job descriptions from each organization with time spent working for the CUSO
well documented

CUSO use of credit union facilities and support structure should be governed by a written agreement and paid at market rates