CU Trades Oppose Proposal to Give NCUA Power Over Servicers Posted by AVCU on 9:30 AM

Granting the NCUA power to examine third-party servicers would give the agency power it does not need, trade groups have told House members considering such legislation. (Credit Union Times, 10/22/19)

House Financial Services Committee majority staff members are circulating draft legislation granting the agency that power as part of the work by the panel’s Task Force on Artificial Intelligence.
Government watchdog groups have said that other banking regulators have that power, while the NCUA does not.

In separate reports last year, the Financial Stability Oversight Council and the Government Accountability Office are warning that additional oversight of servicers—particularly fintech companies—is needed to guard against abuses.

“Lack of authority over third-party servicers does limit the extent to which the NCUA can evaluate and supervise the risks to credit unions posed by fintech companies,” NCUA Executive Director Mark Treichel said, in response to the GAL report.

In a memo distributed to the committee, the draft legislation “would give the NCUA and FHFA the same oversight of third-party vendors for credit unions, Fannie Mae, Freddie Mac, and FHLBs, that bank regulators have for third-party vendors of banks.”

NAFCU President B. Dan Berger said the legislation is not needed.

“Giving NCUA authority over third parties will provide no clear benefit to credit unions and their members but will result in duplicative regulation as other federal agencies already compile and can share this information with the NCUA,” he said.

In a letter to the leaders of the House AI task force, CUNA President/CEO Jim Nussle wrote that if Congress gives oversight powers, Congress also must address investment limitations that ensure parity for credit unions to invest in CUSOs.

He said that the NCUA has performed effective oversight of CUSOs even without official authority. He also said that extending the authority could result in an increase of the agency’s budget because the NCUA would have to hire people to supervise the firms.

He also said that while the agency has asked for the authority, “it has yet to develop a clear vision of the scope of this authority or how they would implement it.”