In testimony before the House Financial Services Committee earlier this week, National Credit Union Administration Chairman Todd Harper urged lawmakers give his agency examination and enforcement authority over third-party vendors, including credit union service organizations, or CUSOs, to address what he called a “growing regulatory blindspot.” The Financial Services Committee is currently considering a bill that would reauthorize section 206A of the Federal Credit Union Act to restore this authority to NCUA after it lapsed in 2002.
“[T]he concentration of credit union services within CUSOs and third-party vendors presents safety and soundness and compliance risk for the credit union industry,” Harper warned. “The continued transfer of operations to CUSOs and other third parties diminishes the ability of NCUA to accurately assess all the risks present in the credit union system and determine if current CUSO or third-party vendor risk-mitigation strategies are adequate. This leaves thousands of credit unions, millions of credit union members, and billions of dollars in assets potentially exposed to unnecessary risks.”
Harper’s comments came shortly after the American Bankers Association urged NCUA to refrain from finalizing a recent proposal that would expand the range of permissible lending activities for CUSOs until (among other things) NCUA is granted supervisory authority over these organizations.