ESCUD Warns Vendor Oversight Bill Would Raise Small CU Costs
By CU Today Staff —
KENNEWICK, Wash.—The Endangered Small Credit Union Defense (ESCUD) is urging the House Financial Services Committee not to advance legislation that would restore permanent NCUA examination authority over third-party vendors and many credit union service organizations.
In a Sept. 3 letter to Chairman French Hill and Ranking Member Maxine Waters, ESCUD President Doug Wadsworth said the group opposes Rep. Bill Foster’s Strengthening Oversight for the Financial Sector Act of 2026 as drafted. ESCUD said it is aligned with America’s Credit Unions, the Defense Credit Union Council, and the National Small Credit Union Association.
The bill would strike the Dec. 31, 2001, sunset in 12 U.S.C. § 1786a and restore, with no replacement sunset, the Y2K-era framework enacted in 1998. That authority reaches the performance of “any service” authorized under the Federal Credit Union Act or applicable state credit-union law, as though performed in-house. It would also restore direct NCUA examination, regulation, and Section 206 enforcement over statutorily defined “credit union organizations,” including many CUSOs owned in whole or in part by federally insured credit unions, Wadsworth said.
Wadsworth argued small credit unions would pay twice: first through higher NCUA operating fees if a new vendor-examination program grows agency staffing, and again when vendors pass compliance costs through contract pricing. The smallest institutions have the least leverage and the fewest alternative providers, he said. Added fixed costs on CUSOs and smaller vendors would push more work to the largest incumbents—“the opposite of a more resilient marketplace.”
Wadsworth noted that credit unions already remain responsible for due diligence, contract controls, member-information safeguards, vendor monitoring, incident response, and business continuity, and NCUA already examines those responsibilities. Direct vendor authority would add a layer without transferring accountability away from the credit union, Wadsworth added.
ESCUD is a 501(c)(4) advocacy organization representing 34 officially endorsing small credit unions under $500 million in assets. Those institutions serve more than 200,000 members and hold about $1.5 billion in combined assets. Wadsworth is also president of the $75 million Tri-CU Federal Credit Union in Kennewick.
Copies of the letter were sent to Financial Institutions Subcommittee Chairman Andy Barr, Rep. Foster, America’s Credit Unions, DCUC, and NSCUA, Wadsworth said.
Originally reported by CU Today.