Credit Union Service Organizations, or CUSOs, have been around for years, but do you know the answers to these 5 Questions? Read on to learn something new about CUSOs, and maybe even get inspired to join, collaborate, or invest in one today!
1. What is a CUSO, anyway?
According to the NCUA regulations Part 712, credit union service organizations, or CUSOs, are corporate entities owned by federally chartered or federally insured, state chartered credit unions. The credit unions that own the CUSO make an investment in or a loan to the CUSO, but aggregate investments in and loans for CUSOs by federal credit unions may not exceed 1% of capital. Credit unions can only invest in or loan to CUSOs that primarily serve credit unions and their members with a permitted service. Most are co-operatives - meaning that profits are used to reward the users of the CUSO with discounts and incentives.
2. What does a CUSO do?
Credit Union Services Organizations do SO many things! Permitted services include:
- automated information processing services
- share draft and other item processing
- credit/debit card services
- microfilm/microfiche services
- printing and supply services
- service center functions
- real estate brokerage/leasing/other services
- electronic transaction services and ATM
- collection activities
- clerical, professional/management services
- checking and currency services
- investment management/research/broker-dealer services
- property leasing/maintenance to Credit unions
- accounting and audit services
- record retention and preservation
- security (data processing equipment and all other property) and disaster recovery services
- architectural services
- marketing services
- management/development/sale/lease of fixed assets services
- sale/lease/service of computer hardware/software
- business/student/credit card loan origination and support services
- locator/research services
- credit analysis
- retirement account developement and administration
- financial counseling services
- insurance/securities/trust brokerage/agency
- payroll processing services
- AND more - as long as it serves the needs of credit unions!
3. Why for a CUSO?
CUSOs have been formed over the years in order for credit unions to save money on service costs, create innovative solutions in for the industry, and even provide a revenue stream for credit unions. This business model has created an avenue for creativity and collaboration between all kinds of credit unions, all over the country. The cooperative spirit of credit unions lives on in CUSOs, especially since they are wholly owned by credit unions. CUSOs understand the needs of credit unions and are fully committed to the success of the credit union industry.
4. Why collaborate with a CUSO?
Collaboration is "the action of working with someone to produce or create something" or "to work jointly with others or together especially in an intellectual endeavor." At the heart of CUSOs is collaboration, and it allows credit unions to share their excellent service and cooperative spirit within the credit union industry and beyond. Continuing and creating excellent member services helps the entire industry, and CUSOs give credit unions the ability to provide it better, cheaper, and more competitively. By working together, credit unions can achieve more with combined capital, expertise, and value.
If one credit union or CUSO has a premier data center, and another organization has created an innovative technology for ATM processing, they can work together to provide cutting-edge ATM intercept processing to credit unions all over the country. Separately, these organizations may not have been able to help credit unions save time, money, and resources on their ATM processing. Credit unions, CUSOs, and otter organizations are constantly working together to take advantage of core efficiencies and combine to form CUSOs to share their strengths with the industry.
5. How do we start a CUSO?
Over the last few years, the NCUA has put more and more regulation on CUSOs, so it is harder than ever to actually start your own CUSO. The spotlight has also been on the failures of CUSOs lately, and the recent risk-based capital rule from the National Credit Union Administration (NCUA) has set the risk weighting of CUSOs at 250%. The National Association of Credit Union Service Organizations (NACUSO) has issued a letter in response to this rule, citing dozens of reasons why this rating is arbitrary and not reflective of the hundreds of solvent CUSOs that have helped credit unions save and make money over the years. Even though there is a certain amount of risk and uncertainty, you can try to avoid a lot of the issues by partnering with or investing in existing CUSOs for your credit union needs. As you can see from the EXTREMELY long list of services that CUSOs provide, there are CUSOs all over the country to solve any problem.
As far as the risk goes, credit unions assess the risk associated with any vendor of any product or service, regardless of their CUSO status or not. CUSOs really do not pose any more risk than other businesses would. As part of the new rule, CUSOs are required to furnish direct reports to the NCUA of extensive information about their business model. The rule is for CUSOs involved in more high risk activities, such as credit and lending. It has been proven that using CUSOs produces immense cost savings, as NACUSO details in their letter to the NCUA. Credit unions have saved millions of dollars every year by working with and investing in CUSOs.
