What are the characteristics of and what requirements apply to CUSOs?
An FCU can invest in or loan to a CUSO only if the CUSO is structured as a corporation, limited liability company, or limited partnership. An FCU may only participate in a limited partnership as a limited partner. For purposes of this part, “corporation” means a legally incorporated corporation as established and maintained under relevant federal or state law. For purposes of this part, “limited partnership” means a legally established limited partnership as established and maintained under relevant state law. For purposes of this part, “limited liability company” means a legally established limited liability company as established and maintained under relevant state law, provided that the FCU obtains written legal advice that the limited liability company is a recognized legal entity under the applicable laws of the state of formation and that the limited liability company is established in a manner that will limit potential exposure of the FCU to no more than the amount of funds invested in, or loaned to, the CUSO.
(b) Customer base.
An FCU can invest in or loan to a CUSO only if the CUSO primarily serves credit unions, its membership, or the membership of credit unions contracting with the CUSO provided, however, that with respect to any approved CUSO service, as set out in § 712.5, that also meets the description of services set out in § 701.30 of this chapter, this requirement is met if the CUSO primarily provides such services to persons who are eligible for membership in the FCU or are eligible for membership in credit unions contracting with the CUSO.
(c) Federal credit union accounting for financial reporting purposes.
An FCU must account for its investments in or loans to a CUSO in conformity with “generally accepted accounting principles” (GAAP).
(d) CUSO accounting; audits and financial statements; NCUA access to information.
An FCU must obtain written agreements from a CUSO, prior to investing in or lending to the CUSO, that the CUSO will:
Account for all its transactions in accordance with GAAP;
Prepare quarterly financial statements and obtain an annual financial statement audit of its financial statements by a licensed certified public accountant in accordance with generally accepted auditing standards. A wholly owned CUSO is not required to obtain a separate annual financial statement audit if it is included in the annual consolidated financial statement audit of the credit union that is its parent; and
Provide NCUA, its representatives, and the state credit union regulatory authority having jurisdiction over any federally insured, state-chartered credit union with an outstanding loan to, investment in or contractual agreement for products or services with the CUSO with complete access to any books and records of the CUSO and the ability to review CUSO internal controls, as deemed necessary by NCUA or the state credit union regulatory authority in carrying out their respective responsibilities under the Act and the relevant state credit union statute.
The effective date for compliance with this section is June 29, 2009.
(e) Other laws.
A CUSO must comply with applicable Federal, state and local laws.
[63 FR 10756, Mar. 5, 1998, as amended at 64 FR 33187, June 22, 1999; 64 FR 57365, Oct. 25, 1999; 66 FR 40578, Aug. 3, 2001; 70 FR 55228, Sept. 21, 2005; 73 FR 79312, Dec. 29, 2008]