NACUSO Says Congress Should Not Give NCUA Vendor Exam Powers

Change would require hundreds of new employees, trade group contends

Congress should not give the National Credit Union Administration the power to supervise and examine Credit Union Service Organizations (CUSOs), Ronaldo Hardy, president/CEO of the National Association of Credit Union Services Organizations wrote leaders of the House Financial Services Committee this week.

“Such expansive, new authorities would grant the NCUA virtually unlimited and unrestricted authority to regulate and examine any business that does business with a credit union,” Hardy wrote.

Hardy’s letter was in response to a letter from four former NCUA chairmen sent to the Financial Services Committee last month. In that letter, the chairmen called on Congress to provide the NCUA power to supervise and examine all third-party vendors working for credit unions.

Hardy said the NCUA cannot do an effective job of supervising vendors. “In our view, NCUA lacks the expertise to regulate and examine any and all businesses that interact with credit unions,” Hardy wrote. “CUSOs and other vendors that service credit unions are diverse entities, offering a wide array of business services.”

Hardy said that a single credit union can easily have more than 100 vendors, adding that products and services offered to those institutions already are regulated by consumer protection and other laws. He said that if the NCUA’s authority is expanded, the agency would likely need hundreds of new employees to review thousands of credit union vendors.

NCUA officials cite cybersecurity as their main concern in asking for vendor authority. But Hardy noted, the agency is seeking unlimited supervisory and examination powers over vendors.

Hardy cited yet another reason for the NCUA seeking supervisory and examination powers over vendors.  “NCUA concedes in past testimony before the committee that one justification for their expanded authority request to have unlimited regulatory and supervisory authority over all credit union vendors stems at least partly from a case of regulator envy with their banking counterparts, such as the FDIC and OCC, that have been allowed some self-limited vendor authority by Congress,” he wrote.