WASHINGTON—Even with ongoing, strong pushback from credit union trade groups, the issue of granting NCUA authority to oversee third party vendors has managed to get in front of Congress.
During a hearing this week in the House featuring Treasury Secretary Janet Yellen, Rep. Bill Foster (D-IL) said, “Last January, I introduced the Strengthening Cybersecurity for the Financial Sector Act that will give the NCUA and Federal Housing Finance Authority the authority to oversee third party vendors that are employed by the entities under their purview.
“Other prudential regulators already have this authority. However, NCUA authority is not allowed, and this left a dangerous gap that leaves consumers and our system at financial risk,” Foster continued. “In fact, last November, a cybersecurity breach of third-party service providers disrupted the operations of 60 credit unions across 40 states. Can you explain why this authority is important and the kinds of risks that this lack of authority presents the financial system?”
Yellen replied by stating, “Well, it's, it's critical to oversee these providers. And (the Financial Services Oversight Council) has recommended that NCUA and FHFA be given these authorities. We appreciate your legislation and would be glad to work with you on it.”
That exchange came after America’s Credit Unions had already sent a letter ahead of the hearing expressing its strong opposition to such oversight authority. The trade group also sent a separate but similar letter ahead of a Senate hearing at which Yellen also appeared.
A Potential ‘Sign’
“Although it’s not new news that the Secretary supports third party exam authority for NCUA, the question from Congress and her response are another sign that the proponents are engaged in a coordinated push. Expect more," said John McKechnie, an advocate for credit unions on Capitol Hill. "If credit unions want to oppose this, we need to start sharpening policy arguments and not simply adopt the Nancy Reagan “just say no” approach. I don’t think that will work."
Earlier this week, as CUToday.info reported here, NCUA Chairman Todd Harper addressed the Brookings Institution, where among other things he repeated his call that the agency be given the authority to oversee vendors to credit unions.
Letter to Senate
In its letter to the Senate, America’s Credit Unions repeated the points it made in its earlier letter to the House.
President/CEO Jim Nussle again urged the Banking Committee to oppose granting the NCUA with third-party vendor authority, arguing NCUA can collaborate with the Treasury – and other stakeholders – to “obtain relevant cybersecurity information.”
Rather than expand the NCUA’s authority, Nussle recommended Congress direct the NCUA to use resources within Federal Financial Institutions Examination Council (FFIEC) or to compel other regulators to provide the NCUA with needed information to meet their needs without adding burdens for credit unions.
Other Points
In the letter, Nussle also:
- Highlighted the work of the CDFI Fund to overhaul its application, but flagged various issues concerns about the legality of the request to require the collection of race and ethnicity data within certain target markets, and pointed out the CDFI Fund has not provided any additional support or clarity.
- Said CUs and CDFIs are best positioned to implement the Greenhouse Gas Reduction Fund and support green efforts due to their experience in lending and strong community ties.
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