HR-10230-119
Referred to the House Committee on Financial Services.
Sponsored by Bill Foster (D-IL)
What it does
This bill would amend the Federal Credit Union Act to modify the National Credit Union Administration's authority over third-party vendors that provide services to credit unions, including changing notification procedures and removing an existing subsection limiting that authority. It would also add a new provision letting the Federal Housing Finance Agency examine and regulate outside contractors that perform work for Fannie Mae, Freddie Mac, and the Federal Home Loan Banks, requiring those entities to notify the FHFA within 30 days of starting a service contract.
Who benefits
Consumers and members of credit unions and mortgage markets who may benefit from stronger oversight of the outside vendors handling data processing, underwriting, and other functions for these institutions. Federal regulators (NCUA and FHFA) gain expanded supervisory reach. Financial stability advocates who argue vendor failures pose systemic risk.
Who is hurt
Third-party service providers and technology vendors that contract with credit unions and the government-sponsored enterprises would face new compliance costs, examination burdens, and disclosure requirements. Smaller vendors with thinner compliance budgets may face proportionally higher costs than large vendors already accustomed to bank-level oversight.
Supporters argue
Supporters argue that credit unions and government-sponsored enterprises increasingly outsource critical functions like loan servicing, data processing, and underwriting to third-party vendors, creating gaps in regulatory oversight since examiners historically could only inspect the regulated entity itself. They contend that closing this gap, consistent with existing bank regulator authority over vendors under the Bank Service Company Act, would help prevent operational failures or cyber vulnerabilities at unregulated vendors from cascading into the broader financial system.
Opponents argue
Opponents argue that expanding examination authority to third-party vendors increases compliance costs that get passed on to credit union members and mortgage borrowers, and that the removal of the existing subsection limiting NCUA vendor authority eliminates a check without clear justification in the bill text. They contend that vendors not otherwise subject to banking regulation may face duplicative or unclear compliance obligations, particularly if state and federal examination authority overlap.
Constitutional context
Congress regulates credit unions and the government-sponsored enterprises under its Commerce Clause power over interstate financial markets, and the new examination authority granted to agency directors will be reviewed by courts applying independent judgment on statutory interpretation following Loper Bright v. Raimondo (2024) rather than automatic deference. The bill's rule of construction preserving state authority also implicates Tenth Amendment federalism concerns, though it explicitly avoids preemption conflicts.
Checks and balances
Congress expands the regulatory authority of two executive branch agencies (NCUA and FHFA) over private vendors; courts retain the ability to review agency rules and examination actions under post-Loper Bright independent judicial review, and the bill explicitly preserves state regulatory jurisdiction as an additional check.
Historical precedent
The Bank Service Company Act already gives federal banking regulators similar authority to examine third-party service providers to banks, which this bill would extend in modified form to credit unions and housing finance entities.