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Proposed Rules
Federal Register Vol. 86, No. 37
Friday, February 26, 2021

This section of the FEDERAL REGISTER
contains notices to the public of the proposed issuance of rules and regulations. The purpose of these notices is to give interested persons an opportunity to participate in the rule making prior to the adoption of the final rules.

NATIONAL CREDIT UNION
ADMINISTRATION
12 CFR Part 712
RIN 3133AE95

Credit Union Service Organizations CUSOs
FOR FURTHER INFORMATION CONTACT:

National Credit Union Administration NCUA.
ACTION: Proposed rule.
AGENCY:

The NCUA Board Board is seeking comment on a proposed rule that would amend the NCUAs credit union service organization CUSO
regulation. The proposed rule would accomplish two objectives: Expanding the list of permissible activities and services for CUSOs to include originating any type of loan that a Federal credit union FCU may originate; and granting the Board additional flexibility to approve permissible activities and services. The NCUA is also seeking comment on broadening FCU investment authority in CUSOs.
DATES: Comments must be received by March 29, 2021.
ADDRESSES: You may submit written comments, identified by RIN 3133
AE95, by any of the following methods Please send comments by one method only:
Federal eRulemaking Portal: http
www.regulations.gov. Follow the instructions for submitting comments.
Fax: 703 5186319. Include Your NameComments on Proposed Rule: Credit Union Service Organizations CUSOs in the transmittal.
Mail: Address to Melane ConyersAusbrooks, Secretary of the Board, National Credit Union Administration, 1775 Duke Street, Alexandria, Virginia 223143428.
Hand Delivery/Courier: Same as mail address.
Public Inspection: You may view all public comments on the Federal eRulemaking Portal http

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www.regulations.gov as submitted, except for those we cannot post for technical reasons. The NCUA will not edit or remove any identifying or contact information from the public comments submitted. Due to social distancing measures in effect, the usual opportunity to inspect paper copies of comments in the NCUAs law library is not currently available. After social distancing measures are relaxed, visitors may make an appointment to review paper copies by calling 703 5186540
or emailing OGCMail@ncua.gov.
Policy and Analysis: Jacob McCall, 703
5186624; Legal: Rachel Ackmann, Senior Staff Attorney, 703 5482601;
or by mail at National Credit Union Administration, 1775 Duke Street, Alexandria, VA 22314.
SUPPLEMENTARY INFORMATION:

I. Introduction Legal Authority and Background The Board is issuing this rule pursuant to its authority under the Federal Credit Union Act FCU Act.1
Under the FCU Act, the NCUA is the chartering and supervisory authority for FCUs and the Federal supervisory authority for federally insured credit unions FICUs. The FCU Act grants the NCUA a broad mandate to issue regulations governing both FCUs and FICUs. Section 120 of the FCU Act is a general grant of regulatory authority and authorizes the Board to prescribe regulations for the administration of the FCU Act.2 Section 209 of the FCU Act is a plenary grant of regulatory authority to the NCUA to issue regulations necessary or appropriate to carry out its role as share insurer for all FICUs.3
Accordingly, the FCU Act grants the Board broad rulemaking authority to ensure that the credit union industry and the NCUSIF remain safe and sound.
Under the FCU Act, FCUs have the authority to lend up to one percent of their paid-in and unimpaired capital and surplus, and to invest an equivalent amount, in CUSOs.4 The NCUA
regulates FCUs lending to and investment in CUSOs in part 712 of its 1 12

U.S.C. 1751 et seq.
U.S.C. 1766a.
3 12 U.S.C. 1789.
4 12 U.S.C. 1757.
2 12

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regulations CUSO rule.5 In general, a CUSO is an organization: 1 In which a FICU has an ownership interest or to which a FICU has extended a loan; 2
is engaged primarily in providing products and services to credit unions, their membership, or the membership of credit unions contracting with the CUSO; and 3 whose business relates to the routine daily operations of the credit unions it serves.6 The CUSO rule provides a list of preapproved activities and services related to the routine daily operations of credit unions.7
The list of preapproved activities and services in the CUSO rule has not been substantively revised since 2008.8 The 2008 final rule added two new categories of permissible CUSO
activities: 1 Credit card loan origination and 2 payroll processing services. The 2008 final rule also added new examples of permissible CUSO
activities and clarified that FCUs may invest in and loan to CUSOs that buy and sell participations in loans they are authorized to originate. In the 2008 final rule, commenters requested additional CUSO lending authority. Specifically, commenters requested the authority to make car loans, including direct lending and the purchase of retail installment sales contracts from vehicle dealerships, and to engage in payday lending. The NCUA, however, declined further expansions of CUSO lending authority at that time.9
II. Proposed Rule The Board proposes to amend the CUSO rule to permit CUSOs to originate any type of loan that an FCU may originate and grant the Board additional flexibility to approve permissible CUSO
activities and services outside of notice 5 12 CFR part 712. All sections of part 712 apply to FCUs. Sections 712.2d2ii, 712.3d, 712.4, and 712.11b and c apply to federally insured, state-chartered credit unions FISCUs, as provided in 741.222 of the chapter. FISCUs must follow the law in the state in which they are chartered with respect to the sections in part 712 that only apply to FCUs. Corporate credit union CUSOs are subject to part 704. Any amendments to part 704 would occur through a separate rulemaking and are not included in this proposed rule.
6 See 12 CFR 712.1d, 712.3b, and 712.5.
7 12 CFR 712.5.
8 73 FR 79307 Dec. 29, 2008.
9 The NCUAs rationale for not extending CUSO
lending authority more broadly is discussed in detail in Section II, Proposed Rule.

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