Harper: NCUA Needs Vendor Authority, CLF Extension

Todd Harper, NCUA Chairman.

Agency head underscores impact of certain legislation on credit union industry at Senate hearing.

NCUA Chairman Todd Harper asked the Senate Banking Committee Tuesday to help ensure that Congress enacts legislation that would extend pandemic-related changes to the agency’s Central Liquidity Facility (CLF) along with a separate bill to give the NCUA supervisory powers over credit union third-party vendors.

Harper testified with other prudential banking regulators and, as in past hearings, was subject to far less grilling by senators than the other regulators.

CLF Extension

Credit union trade groups and members of the NCUA board have been pushing Congress to add the CLF provisions to end-of-year, must pass legislation, such as the defense authorization bill.

“Notably, the extension of this enhancement comes at no cost to the taxpayer, as scored by the Congressional Budget Office,” Harper told the committee.

He added that without legislation, three out of four credit unions will lose access to the CLF, and “the credit union system’s capacity to address liquidity events will shrink by almost $10 billion.”

Third-Party Vendor Authority

Harper called the lack of oversight powers over vendors a “regulatory blind spot.”

He told the committee that enacting the vendor legislation would provide the NCUA with the same powers as other agencies that supervise and regulate federally insured depository institutions.

“This examination authority is critical given the system’s increased reliance on third-party vendors and credit union service organizations,” he stated.

Response From the Committee

Senate Banking Committee Chairman Sen. Sherrod Brown, D-Ohio, supported the vendor legislation.

“We need to make sure that banks and credit unions can partner with third parties in a way that allows banks to stay competitive without putting consumer money at risk,” he said during Tuesday’s hearing.

In a more lengthy written statement, Harper said that the NCUA continues to review credit union overdraft programs, adding that an over-reliance on overdraft fees could emerge as a safety and soundness issue. Examiners are requesting information about credit union overdraft programs, he noted, and those examinations could be used for a more thorough review of overdraft fees next year.

In an opening statement, Banking Committee ranking Republican Sen. Pat Toomey of Pennsylvania criticized the regulators for “increasingly straying outside their mandate” to tackle political issues.

“The NCUA has also warned that credit unions ‘may need to consider adjustments to their fields of memberships as well as the types of loan products they offer’ because of global warming,” Toomey said.

“Here is the reality: some unelected financial regulators want to accelerate the transition to a lower-carbon economy by misusing their powers to allocate capital away from traditional energy companies,” he added.