WASHINGTON (9/28/11)--The National Association of State Credit Union Supervisors (NASCUS) has urged the National Credit Union Administration (NCUA) to reconsider its proposed additions to rules governing credit union service organizations (CUSOs) and adopt a more targeted approach to CUSO oversight. In a comment letter to the agency, NASCUS said that instead of adopting its proposed rule, the NCUA should work with state regulators “to enhance supervision by improving existing authority and monitoring programs, and minimize regulatory burden by adopting a targeted approach to CUSO oversight.” The NASCUS letter mirrored some of the key points made in a similar letter by the Credit Union National Association (CUNA) recently. CUNA also urged a more targeted approach to CUSO governance than that proposed by the agency and also argued the NCUA should implement “existing requirements, such as due diligence." The NCUA's proposal, released in July, would require CUSOs and their subsidiaries to directly file their financial statements with the NCUA. Financial reports would also need to be forwarded to appropriate state supervisors under the rule. The agency has argued that the proposal, if enacted, would "enhance protections to consumers, credit unions and the National Credit Union Share Insurance Fund." The NASCUS comment letter said that complying with these requirements would “unnecessarily drain the resources of both regulators and the industry by capturing information from CUSOs engaged in non-financial services which may have minimal balance sheet safety and soundness implications.” Rather than focusing on supervisory oversight of CUSOs, state and federal credit union regulators “should focus on the credit union's relationship with its CUSO,” NASCUS suggested. One way this relationship could be evaluated is by paying greater attention to credit union due diligence during regulators’ routine credit union examinations. Examiners could then work to unearth additional information on a credit union’s relationship with its CUSO if any potential issues are exposed. Overall, existing rules and regulations that apply directly to federally insured credit unions “provide ample authority to review relevant information” on the credit union/CUSO relationship, NASCUS said. The association added it is “confident that NCUA and state regulators can develop a targeted CUSO supervision program that addresses legitimate regulatory concerns while preserving the benefits CUSOs provide the credit union system.” CUNA, in its letter, said the NCUA should withdraw--or at least substantially modify--the CUSO rule because CUSOs do not pose a risk to the credit union system nor do they pose overall concerns to the National Credit Union Share Insurance Fund. For the NASCUS and CUNA comment letters, use the resource links.