Credit unions are not authorized to be general partner. Credit Union Service Organizations During my presentation at the Meeting of Directors of the Credit Union Central of BC in Vancouver last November, I encouraged the audience to consider alliances as an alternative to mergers, in order to solve some of the economies-of-scale problems facing a typical credit union.
If interested in considering the alternative, one should inquire with local regulators what their position is with respect to this business form. Two examples of wholly owned CUSOs are: An important due diligence step is to speak to both current credit union clients and credit unions that are no longer clients of that CUSO.
They may serve only credit union service organization business plan unions, members of the investing credit union or members of credit unions under agreement with the CUSO. When these services are provided through it, financial risks are isolated from the credit union, yet the credit unions that invest in the CUSO retain control over the quality of services offered and the prices paid by the credit unions or their members.
Although some credit unions may use the request-for-proposal process as a due diligence tool for critical services, remember that due diligence is an expense both for the credit union and the vendor, so make sure the information sought is truly relevant to answering these three key questions: CUSOs are corporations created by credit unions that are permitted by NCUA regulations to perform specific financial and operational services for member credit unions.
This is to isolate the credit union from risks that may be assumed in the CUSO. View by Theme On building alliances: It is especially important in this situation that there are clear exit procedures for the owners should an irreconcilable dispute arise. In fact, experimentation by US credit unions and regulators over the last 30 years has lead to the development of a business form that appears to be quite suitable as an institutional framework to accomplish inter-credit union alliances and joint ventures.
The non-credit unions may be the founding individuals or they may be part of a business model, such as a joint venture with a title insurance agency.
There may be wide disclaimers in the warranty section, mismatched indemnifications or very limited damages exposure that will come as a big surprise if a problem arises.
CUSOs tend to be better risk-sharing partners than other third party service providers, because they focus on serving credit unions — some or all of which are the owners of the CUSO.
Highly Critical; Critical; and Non-Critical. The credit union will have to do some research on the costs of providing the services internally and the costs charged by a CUSO or other service providers for a similar level of service.
The contract should give the credit union the right to obtain injunctive relief to stop a violation of the confidentiality and non-solicitation provisions. I always recommend that the parties have a no-cause termination provision which has a relatively short notice period.
The usual method of splitting profits and loss is based on the percentage of ownership. Effective due diligence The basic purpose of doing due diligence is to determine that the third party arrangement is a fair deal and good value for the credit union.
R-CUSOs offer credit unions the opportunity to provide its customers a service which a regulation otherwise prevents them from offering, raise capital in the market, or earn commissions it is not allowed to as a credit union. There needs to be a provision that the CUSO will not continue to solicit members after the contract has terminated.
However the services can be provided through a CUSO. CUSOs providing operational services use a tiered pricing structure that reward heavy usage. Of course, CUSOs can perform more than one task.Since it launched in Maythe Credit Union Student Choice service organization has grown from seven credit union partners offering student loans to.
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It is the responsibility of the Credit Union to maintain this Plan to ensure contents are accurate and current. Plan Maintenance The CU*NorthWest Business Recovery Plan will be revised every twelve months or as needed based on: • Ensuring the Business Continuity Plan is continually updated to reflect the current operating environment.
To help credit union members understand what such an alliance may look like, I now present a brief description of one of the most successful alliances amongst small groups of credit unions-the Credit Union Service Organization (CUSO).
Xtend, Inc. is a % credit union-owned CUSO formed in with headquarters in Grand Rapids, Michigan. Xtend provides a wide array of managerial, operational, marketing, technical planning and consulting services for credit unions of all sizes.
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National Credit Union Administration, a U.S. Government Agency.Download