(A) A "Credit Union Service Organization"
(CUSO) means any organization, as determined by the
superintendent, in which a credit union can invest in and make loans if the
CUSO primarily serves credit unions, its membership, or the membership of other
credit unions and whose business relates to the daily or routine operation of
the credit unions it serves, are incidental to the credit union, are provided
for the benefit of the members of the credit union or whose activities or
services are approved by the superintendent. A credit union may invest in or
loan to a CUSO by itself, with other credit unions or with non-credit union
parties
entity in which a credit union has an
ownership interest or to which a credit union has extended a loan, and that
entity is engaged primarily in providing products or services to credit unions
or credit union members. A CUSO also includes any
entity in which a CUSO has an ownership interest of any amount, if that entity
is engaged primarily in providing products or services to credit unions or
credit union members.
(B) A
credit union may invest in shares, stock or
obligations of a CUSOs in
an aggregateamounts
amount not
exceeding ten per cent of the credit union's total net worth, unless otherwise approved by the
superintendent prior to making the
investment.
(C) A credit
union may make loans to a CUSOs in an aggregate
amounts
amount not exceeding ten per cent of the credit
union's net worth, which percentage is independent of the ten per cent
investment limit, unless otherwise approved by the superintendent
prior to making the loan.
(D)
A credit union
may invest in or loan to a CUSO by itself, with other credit unions, or with
non-credit union parties.
(E)
A credit union may invest in or loan to a CUSO only if
the CUSO is structured as a corporation, limited liability company, or limited
partnership. A credit union may participate in a limited partnership only as a
limited partner.
(D) A credit union's maximum
investment and loans in CUSOs may not exceed, in the aggregate, twenty per cent
of its net worth, unless otherwise approved by the
superintendent.
(E)(F)
A CUSO chartered as a corporation, a limited
liability company, or a cooperative must be adequately capitalized and operated
as a separate entity. A credit union making an investment in or loan to a CUSO
structured as a limited liability company shall obtain written legal advice as
to whether such organization is established in a manner that will limit the
credit union's potential exposure to no more than the loss of funds invested in
or lent to the CUSO.
(1)
A credit union and a CUSO should be operated in a
manner that demonstrates the separate corporate existence of the credit union
and the CUSO, including:
(a)
The business transactions, accounts, and records of
each are not intermingled;
(b)
Each observes the
formalities of its separate corporate procedures;
(c)
Each is
adequately financed as a separate unit in the light of normal obligations
reasonably foreseeable in a business of its size and character;
(d)
Each is held out
to the public as a separate enterprise;
(e)
The credit union
does not dominate the CUSO to the extent that the CUSO is treated as a
department of the credit union; and
(f)
Unless the credit
union has guaranteed a loan obtained by the CUSO, all borrowings by the CUSO
indicate that the credit union is not liable.
(2)
A credit union
making an investment in or loan to a CUSO shall, prior to making the investment
or loan, obtain written legal advice from independent legal counsel as to
whether the CUSO is established in a manner that will limit the credit union's
potential exposure to no more than the loss of funds invested in or loaned to
the CUSO.
(F) A credit union may participate
only as a limited partner in a CUSO structured as a limited partnership. As
such, the credit union shall not engage in those activities which may cause the
credit union to lose its status as a limited partner, and correspondingly its
limited ability, and thereby be treated as a general partner. A credit union
shall obtain written legal advice to ensure it will not be treated as a general
partner.
(G) A credit union may invest in or lend to a
CUSO only if the organization
CUSO primarily serves credit unions, its membership,
and/ or the membership of
affiliated credit unions
contracting with the CUSO.
(H)
Investments in
or loans to CUSOs shall be limited to organizations which engage in activities
or services which relate to the daily operation of credit unions, are
incidental to the credit union, are for the benefit of their members, or have
been approved by the superintendent. The
superintendent preapproves CUSOs
following are
to
participate in the following
examples
of activities or services
in which a CUSO
may participate:
(1)
Checking and currency services: check cashing; coin and
currency services; money order, savings bonds, travelers checks, and purchase
and sale of U.S. Mint commemorative coins services; and stored value
products;
(2)
Clerical, professional and management services:
accounting services; courier services; credit analysis; facsimile transmissions
and copying services; internal audits for credit unions; locator services;
management and personnel training and support; marketing services; research
services; supervisory committee audits; and employee leasing
services.
(3)
Electronic transaction services: automated teller
machine (ATM) services; credit card and debit card services; data processing;
electronic fund transfer (EFT) services; electronic income tax filing; payment
item processing; wire transfer services; and cyber financial
services.
(4)
Financial counseling services: developing and
administering Individual Retirement Accounts (IRA), Keogh, deferred
compensation, and other personnel benefit plans; estate planning; financial
planning and counseling; income tax preparation; investment counseling;
retirement counseling; and business counseling and consultant
services.
(5)
Fixed asset services: management, development, sale, or
lease of fixed assets; and sale, lease, or servicing of computer hardware or
software.
(6)
Insurance brokerage or agency: agency for sale of
insurance; provision of vehicle warranty programs; provision of group
purchasing programs; and real estate settlement services.
(7)
Leasing: personal
property; and real estate leasing of excess CUSO property.
(8)
Loan support
services: debt collection services; loan processing, servicing, and sales; sale
of repossessed collateral; real estate settlement services; purchase and
servicing of non-performing loans; and referral and processing of loan
applications for members whose loan applications have been denied by the credit
union.
(9)
Record retention, security and disaster recovery
services: alarm-monitoring and other security services; disaster recovery
services; microfilm, microfiche, optical and electronic imaging, CD-ROM data
storage and retrieval services; provision of forms and supplies; and record
retention and storage.
(10)
Securities brokerage services.
(11)
Shared credit
union branch (service center) operations.
(12)
Trust and
trust-related services: acting as administrator for prepaid legal service
plans; acting as trustee, guardian, conservator, estate administrator, or in
any other fiduciary capacity; and trust services.
(13)
Real estate
brokerage services.
(14)
Payroll processing services.
(15)
Loan
origination, including originating, purchasing, selling, and holding any type
of loan permissible for credit unions to originate, purchase, sell, and hold,
including the authority to purchase and sell participation interests that are
permissible for credit unions to purchase and sell.
(1) Operational services: credit
card and debit card services; check cashing and wire transfers; internal audits
for credit unions; ATM services; EFT services; accounting services; data
processing; shared credit union branch (service center) operations; sale of
repossessed collateral; management, development, sale or lease of fixed assets;
sale, lease or servicing of computer hardware or software; management and
personnel training and support; payment item processing; locator services;
marketing services, research services; record retention and storage; microfilm,
microfiche, optical and electrical imaging, CD-ROM data storage and retrieval
services; alarm-monitoring and other security services; debt collection
services; credit analysis; consumer mortgage loan origination; loan processing,
servicing and sales, coin and currency services, and provision of forms and
supplies; money orders; savings bonds; travelers checks; purchase and sale of
U.S. mint commemorative coins services; courier services; facsimile
transmissions and copying services; supervisory committee audits; electronic
income tax filing; and cyber financial services;
(2) Financial services: financial
planning and counseling; retirement counseling; investment counseling;
securities brokerage services; estate planning; income tax preparation; acting
as administrator for prepaid legal service plan; developing and administering
IRA, Keough, deferred compensation, and other personnel benefit plans; trust
services; acting as trustee, guardian, conservator, estate administrator, or in
any other fiduciary capacity; real estate brokerage services; travel agency
services; agent or agency for sale of insurance; personal property leasing; and
provision of vehicle warranty programs; provision of vehicle warranty programs;
provision of group purchasing program; real estate leasing of excess credit
union service organization property; alarm-monitoring and other security
services; disaster recovery services; student loan origination; all telephone
and telecommunication services; and business loan origination.
(3) In connection with providing a
permissible service, a credit union may invest in a non-credit union service
organization service provider. The amount of the credit union's investment is
limited to the amount necessary to participate in the service provider, or a
greater amount if necessary to receive a reduced price for goods or
services.
(4) The superintendent may expand
the range of services, beyond those set forth in paragraph (H) of this rule or
as otherwise determined by the superintendent, for purposes of investments in
or loans to CUSOs as set forth in paragraph (N) of this rule. Such approval
shall be obtained from the superintendent in writing.
(I)
In connection with providing a permissible service, a
CUSO may invest in a non-CUSO service provider. The amount of the CUSO's
investment is limited to the amount necessary to participate in the service
provider, or a greater amount if necessary to receive a reduced price for goods
or services.
(I)(J)
Individuals who serve as officials of, or are
employed by, an affiliated credit union, and immediate family members of such
individuals, may not receive any salary, commission, investment income, other
income, or compensation from a CUSO either directly or indirectly, or from any
person being served through the CUSO. This provision does not prohibit an
official or employee of a credit union from assisting in the operation of a
CUSO, provided the individual is not compensated by the CUSO. Further the CUSO
may reimburse the credit union for the services provided by the
individual.
The provisions in
12 CFR
712.8, effective as of January 16, 2024,
regarding transaction and compensation limits, apply to credit unions to the
same extent as if such a credit union were a federal credit union, or
FCU.
(J)(K) A credit union must
account for its investments in or loans to a CUSO in
conformity with GAAP.
follow GAAP in its
involvement with CUSOs.
(K)(L)
An
A
affiliated credit union must obtain
a written
agreements
agreement
from a CUSO, prior to investing in or lending to the
organization
CUSO,
that the
organization
CUSO will:
(1)
Follow GAAP;
(2) Render financial
statements (balance sheet and income statement) at least quarterly and obtain
an annual audit of the financial statement by a public accountant or certified
public accountant licensed to do business in this state and provide copies of
such to the affiliated credit union;
(3) Provide the superintendent or
his
the
superintendent's representatives with complete access to any books and
records of the CUSO, as deemed necessary
by the
superintendent in
in order to
carrying
carry out
his
the superintendent's responsibilities.
(L) As used in this
rule:
"Official" means directors or
committee members.
(M) CUSOs are not permitted to acquire
control of, either directly or indirectly, another depository financial
institution, nor invest in shares, stocks, or obligations of an insurance
company, trade association, liquidity facility or similar organization,
corporation, or association.
(N)
The superintendent may expand the range of
activities and
or services a CUSO can offer
for purposes of a credit union investing in or
lending to the CUSO
beyond those listed in
paragraph (H) of this rule. Any such
request to expand the range of services
shall be filed with the superintendent prior to the
credit union investing in or loaning to the CUSO and shall include an
explanation of the activity or services and how that activity or service
relates to the daily operation of the credit union, is incidental to the
operation of the credit union, or is being offered as a benefit to the members
of the credit union. The superintendent shall notify the credit union not more
than fifteen business days after the filing of the request for expansion of
services or policy whether it is denied, approved, or requires modification. If
the superintendent does not respond within fifteen business days after the
filing of the request or policy, it shall be deemed approved; unless, the
superintendent notifies the credit union in writing within fifteen business
days of the credit union's request being filed that additional documentation
or information is required
being
requested. If additional documentation is required
requested,
the credit union shall have
has thirty days to file the additional
documentation with the superintendent. If the superintendent does not respond
within fifteen business days of receipt of the additional documentation, the
request or policy shall be deemed approved.
(O)
Except as
otherwise provided in paragraphs (B), (C), and (N) of this rule, approval by
the superintendent is not required for a credit union to invest in or loan to a
CUSO.
(P)
CUSOs are subject to the reporting requirements set
forth in 12 CFR
712.3(d)(4), effective as of
January 16, 2024, and shall report to the superintendent in the same manner as
would be reported to the National Credit Union Administration.
(Q)
CUSOs are
expected to comply with applicable Federal, state, and local laws and be
sufficiently bonded and insured for their specific operations. The
superintendent may at any time, based upon supervisory, legal, or safety and
soundness reasons limit any CUSO activities or services, or refuse to permit
any CUSO activities or services.
