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Guideline #3: Keep expectations reasonable.
Make sure your vendor management program is thorough and extends to CUSOs just as it does to non-CUSO partners, urges the whitepaper. And use it with all CUSOs your credit union partners with.
It’s critical that the credit union be as clear as possible about what it’s looking for in a partner. In the lending business, the credit union has the responsibility, no matter what services the CUSO has provided, to see that the loans it’s putting on the books are loans it understands and is comfortable with, from a risk standpoint.
It’s critical that both sides understand what they need and don’t need from the other party. And both parties must know what they can, and can’t, offer.
Proper due diligence should involve a great deal of research, and in the middle of that process, it may be tempting to just call supplied references. But it’s well worth the extra effort to find others.
“Cold call some of their users and get the complete story,” says Bresko. “CUSOs are part of the credit union industry, and it’s a small world. If you mess up, word gets around, whether it’s on their reference sheet or not.”
Bresko says the credit union’s size shouldn’t matter when it comes to receiving quality service from a CUSO. “For smaller credit unions, CUSOs can provide extra support and a lot of the due diligence that the credit union can’t necessarily provide. But don’t make assumptions. Be clear about what the CUSO is providing and not providing.
“Ongoing communication is critical, so changes can be made quickly. If something’s not working, address it directly so you don’t get too far off base.”
The credit union should be in the driver’s seat. While the CUSO can help guide the credit union to make certain it follows the rules and regulations, ultimately, the credit union is responsible. If something goes wrong, the credit union can’t go back to the CUSO and hold it liable. CUSOs can’t always predict every financial detail. The credit union makes the ultimate decision about every transaction on the books.
Guideline #4: If in doubt, ask, ask, then ask again.
If you don’t fully understanding any loan detail, speak up. Again, good, timely, consistent communication is the key, says Bresko. “What you’re thinking is happening and what’s really happening may be two different things.”
Lending departments need to reassess whether they can and should rely on a CUSO to comply with lending regulations, says the whitepaper. But the lending executive must be careful not to lean on the CUSO too much. Auditing and continuous monitoring are critical, in addition to having a solid understanding of the regulations yourself.