"Today the industry is used to the NCUA simply assigning credit unions and vendors a long list of required third-party reviews, examinations, and audits at our expense, so what would change?" Karnes asked. "They would read them? I thought they already did and used their powers over credit unions to influence the marketplace."

Karnes explained that the state and the NCUA has regularly reviewed CU*Answers' operations since 1995.

"So I see no real change coming, other than a negative competitive environment when the NCUA uses CUSOs as the easy or low-hanging fruit for vendor reviews, and does not apply regulatory authority evenly between CU-owned and third-party-owned vendors," he said.

Mike Atkins, CEO of Open Technology Solutions, a CUSO based in Centennial, Colo., predicted that the NCUA's budget would rise if Congress granted the agency authority over third-party vendors. NCUA Board Chairman Debbie Matz has said the implementation of vendor authority would be budget neutral.

"Through their regulation of credit unions, which are the owners of CUSOs, the NCUA already has the ability to understand the viability of CUSOs and impose their will upon credit unions with respect to CUSOs," Atkins, secretary of NACUSO, said. "Further, the NCUA would need a significant lift in expertise and budget, the cost of which would be passed on to credit unions, to position themselves as an authority over the vast array of vendors (CUSOs and non-CUSOs) utilized by credit unions."

NACUSO has created an advocacy fund with contributions from the association's members and retained the services of a governmental relations entity to communicate its position on the issue to Congress.

According to Atkins, the vendor management programs already required by the NCUA are sufficient. He said the programs ensure a comprehensive vendor due diligence process.

"The increase in costs, complexity and bureaucracy that would accompany any program of NCUA vendor authority would come with no actual improvement in safety and soundness beyond what is achieved today," he said.

Steve Salzer, SVP of legal and general counsel at PSCU, a CUSO in St. Petersburg, Fla., agreed with Atkins' assessment.

"The NCUA already has all the ability, through its regulation of the credit unions that are the owners of CUSOs, to see what CUSOs are doing and to enforce its will upon CUSOs," he said. "For more than 20 years, the NCUA has required credit unions to have their CUSOs contractually agree to open up their books and records to the NCUA, and in 2013 the NCUA amended its regulations to require CUSOs to directly report certain information to the NCUA on an annual basis."

Matz has emphasized the NCUA does not intend to examine vendors or CUSOs on a regular basis if it is granted the authority from Congress.

"It would be on a need-to-examine basis when we have reason to believe there is something in that entity that could pose a threat to the system," she said.

Matz has said a vendor examination would originate from a red flag noticed during a normal credit union examination.

"We will have an established framework outlining the circumstances under which we would go into a particular vendor or CUSO," she said.

For the last several years, Salzer said PSCU has been building its own vendor management program that adheres to regulatory best practices. Overall, Salzer said CUSOs are producing considerable savings through collaborative risk sharing and significant noninterest income.

"NCUA claims that the systemic risks to the credit union industry from CUSOs are part of the reason that supervisory authority is needed," he said. "But the law and regulations already deal with the risk issue by limiting the power to invest and loan to CUSOs to a nominal amount of 1% of a credit union's balance sheet," he said.

"The actual investment today is much less – only 22 basis points of credit union assets are invested in CUSOs, which is statistically incapable of constituting a systemic risk," he added.

Salzer also predicted that vendor authority would ultimately increase costs for the credit unions since it would require significant investments from the NCUA.

"NCUA does not have the expertise to review the operations and financials of CUSOs, which are business-to-business enterprises, unlike credit unions, which are business-to-consumer enterprises," he said.

"CUSOs are innovators and incubators of new ideas, which are absolutely needed to deal with changing economic realities," Salzer added. "Additional regulations will impede credit union efforts to utilize CUSOs to help them address marketplace challenges."