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NCUA Delays Advancement of Loan Participations* as well as CUSO Proposals

Following up on the positive development from the week June 18 regarding the delay of a new final rule on credit union service organizations (CUSOs), National Credit Union Administration (NCUA) Board Chairman Debbie Matz announced last week at a meeting of the Credit Union Association of the Dakotas that she is also postponing consideration of a final rule on loan participations.  While these rules could come back to the Board eventually, it is clear from Credit Union National Association's (CUNA) conversations with key NCUA personnel that they will not be on the agency’s Board meeting agenda for at least a number of months.

Along with a number of leagues, CUNA has opposed the loan participation and CUSO proposals aggressively and tenaciously, meeting and communicating with the Board and senior agency staff members on an ongoing basis since these proposals were first issued.

To help mitigate the impact of the loan participation proposal, CUNA urged NCUA to develop a working group, as it did with troubled debt restructurings.  Such a group has been formed. It includes Ron McDaniel (California Credit Union), Scott Waite (Patelco Credit Union), and Joy Cousminer (New York WeCare4Cus), all of whom CUNA recommended, coordinating with the leagues.

However, even though a working group has been formed regarding loan participations, CUNA’s view is that neither of these proposals, on loan participations or on CUSOs, should advance.  Going forward, CUNA is now urging the agency to drop these proposals altogether or to make substantial improvements that will not result in new regulatory burdens for credit unions or CUSOs.

*  The loan participation proposal, issued by the Board for comments in December, would, among other things, have imposed a limit on loan participation purchases for federal and state chartered federally insured credit unions from a single originator to 25% of the purchasing credit union’s net worth. No waivers would have been permitted from this limitation.  Loan participation purchases involving one borrower or group of associated borrowers would have been limited to 15% of the purchasing credit union’s net worth but purchasing credit unions may have been able to obtain a waiver from this requirement if the regional director approved. (As detailed in last week’s CUNA Regulatory Advocacy Report and in prior reports, the CUSO proposal was also egregious and would have required, among other things direct reporting from CUSOs to NCUA, which does not have legal authority over CUSOs.)

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