Comment from The Endangered Small Credit Union Defense (www.endangeredsmallCUdefense.org)

On behalf of the Endangered Small Credit Union Defense (ESCUD), a 501(c)(4) nonprofit advocacy organization dedicated exclusively to securing targeted regulatory relief for the nation’s smallest credit unions (those under $500 million in assets), we submit these comments on the proposed rule to eliminate the prescriptive concentration limits and related waiver process in §§ 701.21(h) and 741.203(c) governing third-party servicing of indirect vehicle loans. ESCUD must first acknowledge that indirect auto lending carries real and significant risks for small credit unions. Margins are often razor-thin after dealer incentives and kickbacks, the programs rely heavily on outside servicers and dealers, and many of our volunteer boards and management teams have limited hands-on experience with these higher-volume, relationship-light lending lines. Without strong safeguards, small credit unions could inadvertently take on elevated credit, operational, or concentration risk that threatens their safety and soundness. For these reasons, we urge the NCUA to maintain vigilant, risk-focused supervision in this area and to provide extra examiner oversight to ensure that boards adopt and follow prudent policies for due diligence, concentration limits, third-party monitoring, and ongoing portfolio review. Examiners should continue to hold small credit unions accountable without resorting to “over-compliance” pressure or mandating expensive outside consultants for tasks that can reasonably be handled in-house. Despite these legitimate risks and our call for heightened examiner scrutiny, ESCUD still supports the proposed deregulation. The current prescriptive limits and mandatory waiver process represent the very type of one-size-fits-all, overly rigid regulation that ESCUD has repeatedly asked the NCUA to eliminate for small credit unions. Removing these inflexible caps could help reduce administrative costs, compliance complexity, and unnecessary paperwork for some small credit unions, plus it will restore operational flexibility to our volunteer boards so they can develop policies and risk limits that are appropriately scaled to each credit union’s size, simple balance sheet, and local market conditions. Small credit unions are not seeking a free pass from prudent risk management; we are simply asking for the freedom to manage our own risks proportionately so we can devote scarce resources to member service rather than checking boxes. ESCUD stands ready to provide additional real-world compliance-cost examples or small-credit-union perspectives to assist the Board’s rulemaking record. We appreciate the NCUA’s continued leadership in identifying and removing regulatory provisions where the “juice is no longer worth the squeeze,” and we look forward to partnering on future rounds of targeted relief for the smallest credit unions. Thank you for the opportunity to comment. Sincerely, Doug Wadsworth President, Endangered Small Credit Union Defense CEO, Tri-Cities Community Federal Credit Union ($75 million assets, Kennewick, WA) doug@tri-cu.com | 509-735-8331