NEWPORT BEACH, Calif.–In the wake of last week’s NCUA board meeting at which all three board members spoke in favor of the agency having third-party vendor oversight authority, NACUSO has sent an alert to its members registering its strong objections.
In addition, NACUSO said it is concerned over a draft bill in the House that would place credit unions under the Bank Services Company Act, which is the statute that gives banking regulators authority to regulate bank service companies and third-party vendors. that draft bill being considered by the House Task Force would give NCUA the authority to regulate CUSOs, which includes full examination authority, and authority to examine all third-party vendors used by credit unions, NACUSO said.
Coverage of the NCUA board discussion can be found here.
“The NCUA board is supporting this effort at a level that has never been stronger when it comes to their desire for vendor authority, primarily because of cyber-security concerns,” NACUSO said.
Three Primary Concerns
NACUSO said it has three primary concerns with NCUA getting “full and unlimited” vendor authority, especially through the Bank Service Company Act:
- NCUA does not have the expertise to regulate and examine all businesses that interact with credit unions. “Obtaining that expertise, whether on staff or through contracted services, is likely to be a very costly proposition - one that will be borne by federally insured credit unions, and ultimately, credit union members,” wrote NACUSO. “How many new NCUA employees will be needed to review the thousands of credit union vendors doing business with over five thousand credit unions nationwide? What will be the cost to hire contractors to cover those types of vendors that NCUA does not have enough employees to review?”
- The exams are already being performed. “NCUA can and should utilize examinations already being performed by the FDIC and OCC of technology providers who provide services and products to both banks and credit unions (which most of the larger technology providers already do)…” NACUSO wrote. “Duplicative examination and supervisory programs are costly.”
- It’s the first step toward one super-regulator. “Once credit unions are grouped with banks and savings institutions in the Bank Service Company Act, and NCUA has the same authority as the OCC and FDIC, it doesn't take a very big leap to simply consider the efficiencies that could be gained by having one financial institution regulator and one financial institution insurer. How? By simply eliminating the NCUA or consolidating it into one of the other banking regulatory agencies,” NACUSO stated.
‘Chilling Effect’
NACUSO went on to say the ability of NCUA to go “beyond mere CUSO reviews and into the actual examination and supervision of CUSOs could well have a chilling effect on one of the most effective and efficient sources of industry innovation - the collaborative small-business model that is credit union service organizations.”
In its letter NACUSO asked for additional support for its NACUSO Advocacy Fund so that it can retain lobbyists to work the issue in the Senate.