WASHINGTON–NACUSO has sent a letter to Capitol Hill outlining its opposition to giving NCUA any regulatory authority over third-party vendors, including CUSOs.
In letters to the respective leaders of the financial services committees in the House and Senate, NACUSO was writing in response to a letter signed by four former chairs of NCUA who called for such authority, as CUToday.info reported here https://www.cutoday.info/Fresh-Today/4-Former-NCUA-Chairs-Send-Letter-to-Congress-Urging-Agency-be-Given-Third-Party-Oversight-Authority
“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,” states the letter, which was signed by President and CEO Ronaldo Hardy. “Labeled innocuously as ‘Third-Party Vendor Authority’ by NCUA, this unprecedented expansion of the agency’s authority is of concern to CUSOs because of the potential impact upon the collaborative model we represent among credit unions that have chosen the CUSO structure to share the risk associated with costly innovation and to enhance the delivery of credit union services to more members from all walks of life.”
NACUSO told Congress NCUA lacks the expertise to regulate and examine any and all businesses that interact with credit unions.
‘Diverse’ Entities
“CUSOs and other vendors that service credit unions are diverse entities, offering a wide array of business services,” NACUSO said. “For example, a CUSO might offer certain investment products that are already highly regulated by FINRA, the Securities and Exchange Commission, the Department of Labor, and other state regulators. NCUA has no in-house expertise in this area, and in fact, NCUA has stated that federal credit unions may not act as broker-dealers in securities or provide investment advice of the type that would render them ‘investment advisors’ under federal securities law.
“Thus, it would add an unnecessary and arguably inappropriate level of regulation for NCUA to get involved in examining these CUSO products. This is just one example of the various products that are already highly regulated and offered by NACUSO members, that do not fall under the NCUA’s jurisdiction or area of expertise.”
Additional Arguments
The letter further argues:
- The necessary investment of agency resources to hire or contract with the broad level of expertise required to examine every provider to CUs will “bring about a dramatic and unnecessary increase in the size, budget and staffing of this federal agency,” which will comes at a cost to CUs.
- NCUA promulgated a CUSO rule in 2013 that essentially gives the agency “review” authority over all CUSOs and provides it all the data it needs, including to review for risks.
- :The stated area of concern that NCUA continues to cite, which is reiterated in the recent letter from the former NCUA Chairs, seems to be primarily limited to the area of cybersecurity. Nevertheless, NCUA continues to seek unlimited vendor regulatory and supervisory authority from Congress. While indeed cybersecurity is a recognized area of risk for all financial institutions (and, notably, there are specialized CUSOs assisting credit unions in dealing with this area of risk), concerns on cybersecurity could be addressed with a more refined approach to regulation and supervision…”
How to Sign Up For the Best Daily News Email in Credit Unions? (It’s Free!)
Every workday CUToday.info delivers the most comprehensive, freshest daily newsletter with the day’s news headlines, including links to the related articles. The Fresh Today newsletter is the most timely, relevant and widely-read source of news and information in the CU community. And it’s free!
If you haven’t yet signed up for the new email solution on which CUToday.info has partnered with ResponseGenius, you can do so here. Signing up requires less than one minute of your time—and it’s free!
Please note that after signing up you may need to go to your Spam/Junk folder and mark the morning headlines email as safe. CUToday.info does not provide its list of readers and emails to outside parties,
And did we mention it’s free?