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A new Government Accountability Office (GAO) report released this week highlighted significant shortcomings in the NCUA oversight of artificial intelligence use by credit unions, warning that outdated guidance and limited authority may leave the sector vulnerable to evolving technology risks.
The report, Artificial Intelligence: Use and Oversight in Financial Services, found that while most federal financial regulators are adapting existing laws and issuing AI-specific guidance, the NCUA lacks two key tools to effectively supervise credit unions’ increasing reliance on AI-driven systems.
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First, the GAO criticized the NCUA’s current model risk management guidance as limited in both scope and detail. Unlike the banking regulators’ broader guidance, the NCUA’s rules focus narrowly on interest rate risk models and do not address AI models used for lending, fraud detection or other critical operations. The GAO recommended that the NCUA expand its guidance to reflect modern model uses and risk management expectations.
Second, the report reiterated a longstanding concern: The NCUA does not have authority to examine technology service providers, which are often the vendors behind AI systems used by credit unions. The GAO first raised this issue in 2015, and as of February 2025, Congress has not granted the NCUA that authority. Without it, the agency cannot directly oversee third-party providers — posing a regulatory blind spot in an increasingly outsourced and digitized environment.
As credit unions adopt AI to streamline credit decisions, enhance customer service and combat fraud, the lack of supervisory tools raises concerns about consumer protection, bias in lending algorithms and operational risk. The GAO urged Congress to act and called on the NCUA to modernize its risk oversight framework.
The NCUA generally agreed with the recommendations, according to the report’s appendix.
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Michael Ogden
Editor-in-Chief at CU Times. To connect, email at [email protected]. As Editor-in-Chief of CU Times since 2016, Michael Ogden has led the editorial team in all aspects of content strategy and execution, including the creation of the publication’s exclusive and proprietary research database of the credit union industry’s economic landscape. Under Michael’s leadership, CU Times has successfully shifted to an all-digital editorial product with new focuses on the payments, fraud, lending and regulatory beats. Most recently, he introduced a data-focused editorial product for subscribers that breaks down credit union issues into hard data, allowing for a deeper and more factual narrative for readers. In 2024, he launched the "Shared Accounts With CU Times" podcast, which offers a fresh, inside-the-newsroom perspective through interviews with leaders from the credit union industry and the regulatory world. He dives into pressing credit union issues, while revealing the personalities working behind-the-scenes to push the credit union world forward. His background includes years as a radio and TV anchor/reporter and a public relations and digital/social media manager, where he covered the food and music industries, as well as cooperatives and credit unions. Over the years, he has launched numerous exclusive video and podcast series, including a successful series of interactive backstage interviews with musicians at music festivals, showcasing his social media and live streaming production skills.
