CUSO Challenge #1: Consortium for De NovosPrivate Group
Opportunities for CUSOs have been pretty good lately. We are regularly talking to credit unions who are thinking about starting their own CUSO or joining with a group of credit unions to start multi-owned CUSO. Is that a smart thing to do today? Why not you say? The more the merrier!
One BIG problem: what’s the outlook for our primary clients, credit unions? How many CUSOs are going to be able to remain profitable and grow if we continue to lose a few hundred credit unions a year? Yes, membership, assets, and deposits continue to grow, but will we still need close to 100 mortgage CUSOs to service 1500, 1000 or 600 CUs if their numbers continue to contract?
We need to change the trend or at least slow it down by helping and supporting a new wave of de novo credit unions. Our experience at CU*Answers in supporting new start-ups by waiving all of the core processing expenses for the first 2 years, has brought to our attention many groups of consumers who feel that their “common bond” can support a uniquely branded credit union to meet their needs. Definitely more than the shameful 5-9 new charters that are approved by the NCUA each year. In terms of state charters, most states haven’t issued a new charter in many years.
Starting a new credit union is a very difficult task given the strange attitude taken by our federal agency and insurer towards any effort to gain a new charter. Part of their hesitancy seems to be the parochial view that a start up credit union is incapable of providing products beyond those offered by credit unions in the 1950s. This puts the new credit union at an immediate disadvantage in the marketplace. CUSOs can play a significant role in creating a new model for starting a credit union. You can read about this role in the white paper “New model for De Novo credit unions in the 21st century” available on our CUSO Challenge website.