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Federal Register / Vol. 86, No. 205 / Wednesday, October 27, 2021 / Rules and Regulations
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CUSO rule, complex or high-risk activities are defined to include credit and lending, including business loan origination, consumer mortgage loan origination, loan support services, student loan origination, and credit card loan origination.59 For consistency, the final rule removes the specific subcategories of lending and instead refers to all loan originations as complex or high risk. Lending activities are considered complex or high risk because they can present a high degree of operational or financial risk.60
Specifically, FICUs making loans to and investments in CUSOs engaged in credit and lending activities may be exposed to significant levels of credit, strategic, and reputation risks.61
Commenters also noted that the CUSO
Registry requires all CUSOs to provide data to the NCUA. Several commenters stated that the current reporting requirements are sufficient and the NCUA should not expand reporting requirements, as proposed. The Board is not expanding what must be reported by CUSOs engaging in complex or high-risk activities, but as proposed is incorporating all types of lending in the definition of complex or high-risk activities.
An association of state credit union supervisors expressed concern that state CUSOs with authority to engage in all forms of lending would be required to report additional information under the proposed rule. The organization requested that the NCUA consult with state regulators. The Board notes that when it adopted this provision in 2013, it broadly described credit and lending activities as complex or high-risk and applied this requirement to FICUs.62
Further, some FISCU-owned CUSOs are reporting the number and dollar amount of their lending activities, even if those lending activities are not explicitly listed in 712.3d. The Board, therefore, does not believe the effect of this rule on CUSOs in which only FISCUs have an ownership interest represents a policy change from that final rule.
activity of certain credit unions. Complex or highrisk CUSOs must also agree to provide the CUSOs most recent year-end audited financial statements to the NCUA. CUSOs engaged in credit and lending services are also required to report the total dollar amount of loans outstanding, the total number of loans outstanding, the total dollar amount of loans granted year-to-date, and the total number of loans granted year-to-date.
59 12 CFR 712.3d5i.
60 78 FR 72537 Dec. 3, 2013.
61 Id.
62 78 FR 72537, 72542 Dec. 3, 2013.

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Expansion of Permissible CUSO
Activities to Other Activities as Approved by the Board in Writing Currently, the list of permissible CUSO activities in 712.5 includes many of the core services and activities associated with the daily and routine operations of credit unions. The list, however, does not provide the Board flexibility to consider additional activities and services without engaging in notice and comment rulemaking. In contrast, part 704 permits corporate CUSOs to engage in any category of activity as approved in writing by the NCUA and published on the NCUAs website.63 Amending part 712 to be similar to part 704 has the potential to reduce regulatory burden by allowing the rule to expand as technology shapes the routine and daily operations of credit unions.
Several commenters supported the proposed change to permit the NCUA to approve of new activities outside of notice-and-comment rulemaking.
Commenters mentioned the current authority in part 704 for corporate CUSOs. Other commenters generally stated that the proposed process would be more efficient and that the advantages outweigh the public input received through notice-and-comment rulemaking. One commenter stated that the change would allow the Board to be more responsive to shifting market dynamics. Another commenter encouraged the NCUA to periodically review the list for updates and to post any additional activities on its website.
A few commenters noted that a technical change is necessary in the regulatory text.
A few commenters who opposed the proposed rule generally discussed that enabling the Board to approve new activities without notice-and-comment rulemaking would eliminate regulatory transparency and opportunity for the public to review and comment on newly proposed CUSO activities. One banking trade organization stated that the authority to approve rules without notice and comment is exacerbated by requiring formal rulemaking to revoke or reform the approved activity, but not adding the same activity. The commenter stated that this policy places a regulatory obstacle to address potentially unsafe and unsound activities, or activities that may be harming consumers, members, and underserved areas and low-to-moderate 63 12

CFR 704.11d3ii. Approved activities are listed on the NCUAs website at: https
www.ncua.gov/regulation-supervision/corporatecredit-unions/corporate-cuso-activities/approvedcorporate-cuso-activities.

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income communities. One credit union trade organization that supported the rule overall nonetheless encouraged the NCUA to do notice-and-comment rulemaking to add approved activities and suggested limiting the comment period to thirty days as a balance between speed and transparency.
Another consumer stated that emerging technologies often pose risks to members and other consumers that should be evaluated through the public notice and comment process.
The Board has considered the comments on this issue and is finalizing the changes to the approval process as proposed. As commenters supporting the change observed, a streamlined process may help CUSOs keep pace with innovation. The Board has considered the opposing comments and notes that its intent is to use this authority only for approving activities that are related to the existing authorities in 712.5. If the Board believes a new authority is sufficiently novel, and that notice and comment is advisable or required under the Administrative Procedures Act, then the Board would use notice and comment rulemaking.
The Board also believes it is reasonable to add new approved activities without issuing the matters for public comment but to solicit public comment before removing activities.
The Board has had this process in place in part 704 for corporate credit unions since 2011 without any indication that the process is unworkable or leads to inadequately considered policy choices.
Using notice-and-comment procedures when removing an approved activity is sound policy to ensure that the Board considers parties serious reliance interests when changing a policy.64
While the removal of any given approved activity may not rise to the level requiring an in-depth analysis of reliance interests before removing it, the general policy of following this process will help the Board ensure it conducts this analysis in appropriate cases.
Second, the Board has considered, but disagrees with, the suggestion to use a 30-day comment period when adding new activities as a blanket policy. While a 30-day comment period would naturally tend to lead to a prompter conclusion than a 60-day comment period, it would still generally result in several months or more from the time the activity is proposed until it is 64 See Dept of Homeland Sec. v. Regents of the Univ. of Calif. et al., 591 U.S. ll 2020, slip. op.
at 23 holding that, when an agency changes course, it must recognize that longstanding policies may have engendered serious reliance interests that must be taken into account.

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