League InfoSight Highlight: New CFPB Registry Applies to CUSOs and Privately Insured Credit Unions
By Glory LeDu, CEO, League InfoSight and CU Risk Intelligence
and Brad Willet, Director of Compliance and Regulatory Affairs, Michigan Credit Union League
The CFPB’s final rule on nonbank covered entities, effective Sept. 16, 2024 requires these entities to report certain information through a CFPB-established registry. Note that federally insured financial institutions are explicitly excluded from this rule; however, based on the definition of a “covered nonbank,” certain affiliates of federally insured credit unions, such as credit union service organizations (CUSOs) and privately insured credit unions would be covered under the rule and required to report through the registry.
Below is an excerpt from the commentary of the final rule:
The Bureau declines to finalize an exemption for CUSOs in § 1092.201(d)'s definition of “covered nonbank.” Unlike insured credit unions, which are exempt from the definition, CUSOs are not directly subject to the NCUA's full examination and enforcement authority and are not chartered or insured by the NCUA. And while presently the NCUA requires a federally insured credit union investing in or lending to a CUSO to obtain a written agreement requiring the applicable CUSO to “provide the NCUA with complete access to its books and records and the ability to review the CUSO's internal controls” and to supply the NCUA with “operational and financial information” via a CUSO registry, the NCUA nevertheless has previously emphasized in congressional testimony that “this does not provide access to examine all of the CUSO's operations.”
The Bureau concludes that requiring covered nonbanks that are CUSOs to register will provide valuable information to the Bureau and others regarding risks such covered nonbanks may present to consumers. Among other things, if—as the Bureau intends—the Bureau publishes registry information, requiring CUSOs that qualify as covered nonbanks to register with the nonbank registry will facilitate credit union due diligence in using a CUSO to provide services to the credit union in connection with the offering or provision of consumer financial products and services.
The Bureau also notes that the credit union exemption provided under § 1092.201(d)(1) applies only to insured credit unions, as that term is defined by § 1092.101(a), which in turn defines the term “insured credit union” to have the meaning given to that term in the CFPA. Thus, this exemption does not apply to credit unions, such as certain uninsured or privately insured credit unions, that do not meet the definition of “insured credit union” under the CFPA and the final rule. Such credit unions must comply with the rule's registration and other provisions with respect to covered nonbanks and supervised registered entities where they would otherwise be applicable.
While required to report, there may be some exemptions to reporting certain information like the annual written statement, if the CUSO and/or privately insured credit union has less than $5 million in annual receipts.
Privately insured credit unions and CUSOs can read more about the requirements of the final rule here:
