Harper repeats call for CUSO exam authority

(Aug. 6, 2021) Congress should give NCUA authority to examine (and enforce actions) over third party vendors, NCUA Board Chairman Todd Harper said in testimony to the Senate Banking Committee this week. He also urged Congress to make several improvements to the National Credit Union Share Insurance Fund (NCUSIF).

In May, Harper made similar requests before the House Financial Services Committee.

On exam authority, Harper asked Congress to give his agency exam and enforcement oversight of third-party vendors, including credit union service organizations (CUSOs). Calling the lack of authority a “regulatory blind spot,” Harper asserted that NCUA should have comparable authority as other federal financial institution regulators already have.

“While there are many advantages to using these service providers, the concentration of credit union services within CUSOs and third-party vendors presents safety and soundness and compliance risk for the credit union industry,” Harper told the committee.

He said the top five credit union core processor vendors provide services to approximately 87% of total assets held by credit unions. Additionally, he said, the top five CUSOs provide services to nearly 96% of total credit union system assets.

“A failure of even one of these vendors represents a significant potential risk to the (National Credit Union) Share Insurance Fund and the potential for losses from these organizations are not hypothetical,” Harper asserted. “Between 2008 and 2015, CUSOs contributed to more than $300 million in losses to the Share Insurance Fund alone.”

The NCUA Board chairman told the committee that the continued transfer of operations from credit unions to CUSOs and other third parties diminished the agency’s ability to “accurately assess all the risks present in the credit union system and determine if current CUSO or third-party vendor risk-mitigation strategies are adequate.”

NASCUS supports the agency obtaining the power over technology service providers (TSPs) that provide services to federally insured credit unions — provided that any such authority requires NCUA to rely on state examinations of such service providers where such authority exists at the state level. Further, NASCUS supports efforts to strengthen state regulatory exam and supervision of third parties providing services to state-chartered credit unions.

Regarding the insurance fund, Harper made three legislative requests to the committee:

  • Increase the fund’s capacity by removing the 1.50% statutory ceiling on its capitalization;
  • Remove the limitation on assessing premiums when the equity ratio exceeds 1.30% of equity in the fund to insured shares, giving the NCUA Board discretion on the assessment of premiums;
  • Institute a risk-based premium system.


NCUA Chairman Todd M. Harper’s Written Testimony before the U.S. Senate Committee on Banking, Housing, and Urban Affairs