Proposed Rule2026-05797
Third-Party Servicing of Indirect Vehicle Loans
Primary source
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Published
March 25, 2026
Issuing agencies
National Credit Union Administration
Abstract
The NCUA Board (Board) is seeking comment on a proposed rule that would remove the NCUA's unnecessarily prescriptive regulation regarding third-party servicing of indirect vehicle loans. This action would reduce regulatory burden and provide credit unions with greater operational flexibility, consistent with a principles-based supervisory approach. The intent is to reduce administrative costs and compliance complexity, enabling credit unions to serve their members more efficiently.
Full Text
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<title>Federal Register, Volume 91 Issue 57 (Wednesday, March 25, 2026)</title>
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[Federal Register Volume 91, Number 57 (Wednesday, March 25, 2026)]
[Proposed Rules]
[Pages 14484-14486]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-05797]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 91, No. 57 / Wednesday, March 25, 2026 /
Proposed Rules
[[Page 14484]]
NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Parts 701, 741, and 746
RIN 3133-AF88
Third-Party Servicing of Indirect Vehicle Loans
AGENCY: National Credit Union Administration (NCUA).
ACTION: Proposed rule.
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SUMMARY: The NCUA Board (Board) is seeking comment on a proposed rule
that would remove the NCUA's unnecessarily prescriptive regulation
regarding third-party servicing of indirect vehicle loans. This action
would reduce regulatory burden and provide credit unions with greater
operational flexibility, consistent with a principles-based supervisory
approach. The intent is to reduce administrative costs and compliance
complexity, enabling credit unions to serve their members more
efficiently.
DATES: Comments must be received by May 26, 2026.
ADDRESSES: Comments may be submitted in one of the following ways.
(Please send comments by one method only):
<bullet> Federal eRulemaking Portal: <a href="https://www.regulations.gov">https://www.regulations.gov</a>.
The docket number for this proposed rule is NCUA-2026-0628. Follow the
``Submit a comment'' instructions. If you are reading this document on
<a href="http://federalregister.gov">federalregister.gov</a>, you may use the green ``SUBMIT A PUBLIC COMMENT''
button beneath this rulemaking's title to submit a comment to the
<a href="http://regulations.gov">regulations.gov</a> docket. A plain language summary of the proposed rule
is also available on the docket website.
<bullet> Mail: Address to Melane Conyers-Ausbrooks, Secretary of
the Board, National Credit Union Administration, 1775 Duke Street,
Alexandria, Virginia 22314-3428.
<bullet> Hand Delivery/Courier: Same as mailing address.
Mailed and hand-delivered comments must be received by the close of
the comment period.
Public inspection: Please follow the search instructions on <a href="https://www.regulations.gov">https://www.regulations.gov</a> to view the public comments. Do not include any
personally identifiable information (such as name, address, or other
contact information) or confidential business information that you do
not want publicly disclosed. All comments are public records; they are
publicly displayed exactly as received and will not be deleted,
modified, or redacted. Comments may be submitted anonymously. If you
are unable to access public comments on the internet, you may contact
the NCUA for alternative access by calling (703) 518-6540 or emailing
<a href="/cdn-cgi/l/email-protection#165951555b777f7a567875637738717960"><span class="__cf_email__" data-cfemail="d79890949ab6bebb97b9b4a2b6f9b0b8a1">[email protected]</span></a>.
FOR FURTHER INFORMATION CONTACT: John H. Brolin or Ariel Pereira,
Senior Staff Attorneys, Office of General Counsel, at (703) 518-6540;
or by mail at National Credit Union Administration, 1775 Duke Street,
Alexandria, VA 22314.
SUPPLEMENTARY INFORMATION:
I. Introduction
A. Background
In 2006 the NCUA approved a final rule \1\ (2006 Final Rule)
governing federally insured credit union purchases of indirect vehicle
loans serviced by third parties, which is codified in Sec. Sec.
701.21(h) and 741.203(c) of the NCUA's regulations. At that time, the
Board recognized that indirect lending has certain advantages for
credit unions, such as growth in membership and loans. The Board was
concerned, however, that some credit unions may involve themselves in
indirect lending programs without adequate due diligence, appropriate
controls, or sufficient experience with a third-party servicer. At that
time, the Board thought this could create undue risk where a third
party manages a credit union's relationship with automobile dealers and
with credit union members whose loans the third party services.
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\1\ 71 FR 36661 (Jun. 28, 2006).
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The resulting regulation governing third-party servicing of
indirect vehicle loans set prescriptive, inflexible limits on the
aggregate amount of indirect loans and participations in indirect
loans. The rule limits the aggregate amount of indirect loans and
participations in indirect loans a credit union may purchase from any
one servicer to 50 percent of the credit union's net worth, which,
after 30 months of experience with a particular servicer, the rule
increases the limit to 100 percent of net worth. These requirements
create a rigid, one-size-fits-all framework that is unduly burdensome
for credit unions. The Board believes that a credit union's board is in
the best position to develop policies that are appropriately scaled to
its activities. Removing the NCUA's current regulatory requirements
would reduce regulatory burden and provide credit unions with greater
operational flexibility, consistent with a principles-based supervisory
approach. Accordingly, the proposed rule would remove these
prescriptive requirements and allow credit union boards to develop
their own policies.
Credit union boards will continue to be responsible for developing
policies and procedures that protect the safety and soundness of the
credit union and ensure that their purchases of indirect vehicle loans
serviced by third parties are appropriately scaled for the credit
union's size and the complexity of the transactions. If this proposal
is adopted as final, the NCUA will continue to monitor credit unions'
purchases of indirect vehicle loans serviced by third parties through
the examination process.
B. Legal Authority
The Board has the legal authority to issue this final rule pursuant
to its plenary rulemaking authority under the Federal Credit Union Act
and its specific rulemaking authority under the various provisions the
Board administers.\2\
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\2\ 12 U.S.C. 1766, 1757, 1789.
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II. Proposed Rule
A. Sec. 701.21 Loans to Members and Lines of Credit to Members
Sec. 701.21(h) Third party servicing of indirect vehicle loans.
Current Sec. 701.21(h)(1) limits the aggregate amount of indirect
vehicle loans and participations in indirect vehicle loans a federal
credit union may purchase from any one servicer to 50 percent of the
credit union's net worth. After 30 months of experience with a
particular servicer, paragraph (h)(1) increases the
[[Page 14485]]
limit to 100 percent of net worth. Paragraph (h)(2) sets forth a
process for a federal credit union to request a waiver from the
concentration limits from its Regional Director. Paragraph (h)(3) sets
forth a timeline for the NCUA to provide written responses to waiver
requests. Paragraph (h)(4) defines various terms, including the term
``third-party servicer,'' which excludes federally insured
depositories, wholly owned subsidiaries of those depositories, and
certain servicing entities.
As previously discussed, the provisions in Sec. 701.21(h) impose a
prescriptive framework for the purchase of indirect vehicle loans
serviced by third parties, which is unduly burdensome for credit
unions. The Board believes that a federal credit union's board is in
the best position to develop policies that are appropriately scaled to
its purchases of indirect vehicle loans serviced by third parties.
Accordingly, the proposed rule would remove current paragraph (h) from
Sec. 701.21.
B. Sec. 741.203 Minimum Loan Policy Requirements Sec. 741.203(c).
Current Sec. 741.203(c) provides that federally insured, state-
chartered credit unions must adhere to the requirements set forth in
Sec. 701.21(h) concerning third-party servicing of indirect vehicle
loans. Paragraph (c) also requires that, before a state-chartered
credit union applies to a Regional Director for a waiver under Sec.
701.21(h)(2), it must first notify its state supervisory authority. In
addition, paragraph (c) states that the Regional Director will not
grant a waiver unless the appropriate state official concurs in the
waiver. Finally, paragraph (c) provides that the 45-day period for the
Regional Director to act on a waiver request, as described in Sec.
701.21(h)(3), will not begin until the Regional Director has received
the state official's concurrence and any other necessary information.
The provisions in Sec. 741.203(c) impose the same prescriptive
framework in Sec. 701.21(h) on federally insured, state-chartered
credit unions for the purchase of indirect vehicle loans serviced by
third parties. The Board also believes that a federally insured, state-
chartered credit union's board is in the best position to develop
policies that are appropriately scaled to its purchases of indirect
vehicle loans serviced by third parties. Accordingly, consistent with
the removal of Sec. 701.21(h), the proposed rule would also remove
current paragraph (c) from Sec. 741.203(c).
C. Sec. 746.201 Authority, Purpose, and Scope
Sec. 746.201(c) Scope. Current Sec. 746.201(c) lists rule
sections and subsections covered under part 746, subpart B for appeals
of initial agency determinations by a program office, which the
petitioner has a right to appeal to the Board. Among other things,
paragraph (c) lists Sec. 701.21(h)(3), which this proposal would
remove. Accordingly, this proposal would remove the citation to Sec.
701.21(h)(3) consistent with the changes made by this proposed rule.
III. Regulatory Procedures
A. Providing Accountability Through Transparency Act of 2023
The Providing Accountability Through Transparency Act of 2023 (5
U.S.C. 553(b)(4)) (Act) requires that a notice of proposed rulemaking
include the internet address of a summary of not more than 100 words in
length of a proposed rule, in plain language, that shall be posted on
the internet website under section 206(d) of the E-Government Act of
2002 (44 U.S.C. 3501 note) (commonly known as <a href="http://regulations.gov">regulations.gov</a>).
In summary, the proposed rule would streamline the NCUA's
regulations governing the organization and operation of federally
insured credit unions by eliminating several provisions that are
outdated, redundant, or unnecessarily prescriptive. Specifically, the
proposal would remove the NCUA's regulation regarding third-party
servicing of indirect vehicle loans. This action would reduce
regulatory burden and provide credit unions with greater operational
flexibility, consistent with a principles-based supervisory approach.
The intent is to reduce administrative costs and compliance complexity,
enabling credit unions to serve their members more efficiently.
The proposal and the required summary can be found at <a href="https://www.regulations.gov">https://www.regulations.gov</a>.
B. Executive Orders 12866, 13563, 14192
Pursuant to Executive Order 12866 (``Regulatory Planning and
Review''), as amended by Executive Order 14215, a determination must be
made whether a regulatory action is significant and therefore subject
to review by the Office of Management and Budget (OMB) in accordance
with the requirements of the executive order.\3\ Executive Order 13563
(``Improving Regulation and Regulatory Review'') supplements and
reaffirms the principles, structures, and definitions governing
contemporary regulatory review established in Executive Order 12866.\4\
This proposed rule was drafted and reviewed in accordance with
Executive Order 12866 and Executive Order 13563. OMB has determined
that this proposed rule is not a ``significant regulatory action'' as
defined in section 3(f) of Executive Order 12866.
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\3\ 58 FR 51735 (Oct. 4, 1993).
\4\ 76 FR 3821 (Jan. 21, 2011).
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Executive Order 14192 (``Unleashing Prosperity Through
Deregulation'') requires that any new incremental costs associated with
new regulations shall, to the extent permitted by law, be offset by the
elimination of existing costs associated with at least 10 prior
regulations.\5\ This proposed rule is expected to be a deregulatory
action for purposes of Executive Order 14192.
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\5\ 90 FR 9065 (Feb. 6, 2025).
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C. The Regulatory Flexibility Act
The Regulatory Flexibility Act \6\ generally requires an agency to
conduct a regulatory flexibility analysis of any rule subject to notice
and comment rulemaking requirements, unless the agency certifies that
the rule will not have a significant economic impact on a substantial
number of small entities. If the agency makes such a certification, it
shall publish the certification at the time of publication of either
the proposed rule or the final rule, along with a statement providing
the factual basis for such certification.\7\ For purposes of this
analysis, the NCUA considers small credit unions to be those having
under $100 million in assets.\8\ The Board fully considered the
potential economic impacts of the regulatory amendments on small credit
unions.
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\6\ 5 U.S.C. 601 et seq.
\7\ 5 U.S.C. 605(b).
\8\ 80 FR 57512 (Sept. 24, 2015).
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The proposed rule would remove the NCUA's regulation regarding
third-party servicing of indirect vehicle loans. This action would
reduce regulatory burden and provide credit unions with greater
operational flexibility, consistent with a principles-based supervisory
approach. The intent is to reduce administrative costs and compliance
complexity, enabling credit unions to serve their members more
efficiently. The NCUA certifies the proposed rule would not have a
significant economic impact on a substantial number of small credit
unions.
D. The Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (PRA) generally provides that
an agency may not conduct or sponsor, and not
[[Page 14486]]
withstanding any other provision of law, a person is not required to
respond to, a collection of information, unless it displays a currently
valid Office of Management and Budget control number. The PRA applies
to rulemakings in which an agency creates a new or amends existing
information collection requirements. For purposes of the PRA, an
information-collection requirement may take the form of a reporting,
recordkeeping, or a third-party disclosure requirement. The NCUA has
determined that the changes addressed in this notice do not create a
new information collection or revise an existing information collection
as defined by the PRA.
E. Executive Order 13132 on Federalism
Executive Order 13132 encourages certain agencies to consider the
impact of their actions on state and local interests.\9\ The NCUA, an
agency as defined in 44 U.S.C. 3502(5), complies with the executive
order to adhere to fundamental federalism principles. The proposed rule
would not have substantial direct effects on the states, on the
relationship between the National Government and the states, or on the
distribution of power and responsibilities among the various levels of
government. The rule would remove a prescriptive limitation that
currently applies to federally insured, state-chartered credit unions,
which would remove a federally imposed restriction on state-chartered
entities. The NCUA has determined that this rule would not constitute a
policy that has federalism implications for purposes of the executive
order.
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\9\ ``Federalism,'' E.O. 13132 (Aug. 10, 1999).
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F. Assessment of Federal Regulations and Policies on Families
The NCUA has determined that this rule would not affect family
well-being within the meaning of section 654 of the Treasury and
General Government Appropriations Act.\10\
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\10\ Public Law 105-277, sec. 654, 112 Stat. 2681, 2681-528
(1998).
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List of Subjects
12 CFR Part 701
Advertising, Aged, Civil rights, Credit, Credit unions, Fair
housing, Individuals with disabilities, Insurance, Marital status
discrimination, Mortgages, Religious discrimination, Reporting and
recordkeeping requirements, Sex discrimination, Signs and symbols,
Surety bonds.
12 CFR Part 741
Bank deposit insurance, Credit, Credit unions, Reporting and
recordkeeping requirements.
12 CFR Part 746
Administrative practice and procedure, Claims, Credit unions,
Investigations.
By the National Credit Union Administration Board.
Melane Conyers-Ausbrooks,
Secretary of the Board.
For the reasons discussed above, the NCUA Board proposes to amend
12 CFR parts 702, 741, and 746 as follows:
PART 701--ORGANIZATION AND OPERATION OF FEDERAL CREDIT UNIONS
0
1. The authority section continues to read as follows:
Authority: 12 U.S.C. 1752(5), 1755, 1756, 1757, 1758, 1759,
1761a, 1761b, 1766, 1767, 1782, 1784, 1785, 1786, 1787, 1788, 1789.
Section 701.6 is also authorized by 15 U.S.C. 3717. Section 701.31
is also authorized by 15 U.S.C. 1601 et seq.; 42 U.S.C. 1981 and
3601-3610. Section 701.35 is also authorized by 42 U.S.C. 4311-4312.
Sec. 701.21 [Amended]
0
2. In Sec. 701.21, remove paragraph (h).
PART 741--REQUIREMENTS FOR INSURANCE
0
3. The authority section continues to read as follows:
Authority: 12 U.S.C. 1757, 1766(a), 1781-1790, and 1790d; 31
U.S.C. 3717.
Sec. 741.203 [Amended]
0
4. In Sec. 741.203, remove paragraph (c).
PART 746--APPEALS PROCEDURES
0
5. The authority section continues to read as follows:
Authority: 12 U.S.C. 1766, 1787, and 1789.
Sec. 746.201 [Amended]
0
6. In Sec. 746.201, amend paragraph (c) by removing the citation
``701.21(h)(3)''.
[FR Doc. 2026-05797 Filed 3-24-26; 8:45 am]
BILLING CODE 7535-01-P
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This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.