A proposal to expand CUSO lending has divided the credit union community, with some financial institutions warning that the plan could be disastrous for some credit unions.

On the other hand, CUSOs and other expansion-promoting credit unions said the proposal represents an effort to take advantage of new technologies and will help expand services.

In January, the NCUA Board of Directors approved, 2-1, a proposal that would expand the types of activities that CUSOs can engage in. The proposed rule would allow CUSOs to grant any type of loan that a federal credit union advises from the agency with more flexibility in determining the legal activities of CUSOs.

At his last meeting as a board member in January, Todd Harper, who is now president, voiced dissent, saying expanding CUSO’s lending options was risky.

Comments on the rule were expected on Monday, but on Friday the agency agreed to extend the comment period by an additional 30 days. A spokesperson for the agency said the board had agreed to extend the comment period, given the interest in the proposal and its importance.

The American Bankers Association and at least one credit union have requested an extension.

“A 30-day comment period doesn’t leave enough time to analyze such a significant change,” said Steven Stapp, president / CEO of Unitus Community Credit Union in Portland, Oregon.

“While providing loan services to auto dealer sales organizations would certainly benefit some credit unions, this CUSO expansion rule would allow those same loan services to be competitive. [with] established credit unions, which thrived in this [place] for many years, ”Stapp wrote in a letter commenting on the rule.

He warned that the proposal has the potential to erode a credit union’s local presence by working with car dealers and borrowers.

Dave Echtle, loan manager at O ​​Bee Credit Union in Lacey, Wash., Agreed.

He said his credit union is state-chartered and has an investment in a local CUSO and other smaller credit unions. He said the ability of a larger credit union to expand a CUSO will create an uneven playing field.

“Small credit unions will not be able to maintain their purchasing power and will eliminate or significantly reduce our market share and the ability to serve local and regional customers or members,” he added.

However, NACUSO chairman Jack Antonini said credit unions must innovate to survive. He said that by joining forces in a CUSO, credit unions gain scale and expertise that allows them to help their members.

“Lending CUSOs are creating a more vibrant industry, providing more quality loans and enabling credit unions to better meet the needs of their members,” he wrote. He said the financial services industry has evolved and cited healthcare purchasing services as an example of this evolution. He said these national services will not establish relationships with thousands of credit unions across the country.

Antonini added that if CUSOs were allowed to be the lender in this relationship, the loan would remain in the credit union industry.

“This proposed rule is a welcome modernization of the CUSO regulation, which will allow credit unions to remain innovative and give credit unions the ability to adapt to changing credit markets,” he said. declared.

If CUSOs are allowed to provide auto and unsecured loans, credit unions would have parity with state-chartered credit unions, as well as banks and fintech companies, said Tony Boutelle, chairman- Managing Director of CU Direct, which serves more than 1,100 financial institutions and more than 14,000 car dealerships.

“The change will help credit unions of all sizes make more loans, improve their efficiency and increase their capacity to [mitigate] risk and fraud, ”he told NCUA.