Rule2026-16029
Third-Party Servicing of Indirect Vehicle Loans
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
August 6, 2026
Effective
September 8, 2026
Issuing agencies
National Credit Union Administration
Abstract
The NCUA Board (Board) is issuing a final rule removing NCUA's unnecessarily prescriptive regulation regarding third-party servicing of indirect vehicle loans. This action will reduce regulatory burden and provide federally insured credit unions (FICUs) 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 150 (Thursday, August 6, 2026)</title>
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[Federal Register Volume 91, Number 150 (Thursday, August 6, 2026)]
[Rules and Regulations]
[Pages 50677-50680]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-16029]
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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: Final rule.
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SUMMARY: The NCUA Board (Board) is issuing a final rule removing NCUA's
unnecessarily prescriptive regulation regarding third-party servicing
of indirect vehicle loans. This action will reduce regulatory burden
and provide federally insured credit unions (FICUs) 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: This final rule is effective on September 8, 2026.
FOR FURTHER INFORMATION CONTACT: John H. Brolin or Ariel Pereira,
Senior Staff Attorneys, at (703) 518-6540; or at 1775 Duke Street,
Alexandria, VA 22314.
SUPPLEMENTARY INFORMATION:
I. Introduction
A. Background
In 2006 NCUA approved a final rule (2006 Final Rule) governing FICU
purchases of indirect vehicle loans serviced by third parties, which is
codified in Sec. Sec. 701.21(h) and 741.203(c) of 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
when a third party manages a credit union's relationship with
automobile dealers and with credit union members whose loans are
serviced by the third party.
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 2006 Final 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 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, on March 25, 2026,
the Board issued a proposed rule to remove these prescriptive
requirements and allow credit union boards to develop their own
policies.\1\ Public comments received on the proposal offered
unqualified support. Accordingly, the Board is now issuing a final rule
removing NCUA's unnecessarily prescriptive regulation regarding third-
party servicing of indirect vehicle loans.
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\1\ 91 FR 14484.
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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. 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 is issuing this final rule pursuant to its authority
under the Federal Credit Union Act (FCU Act). Under the FCU Act, NCUA
is the chartering and supervisory authority for federal credit unions
(FCUs) and the federal supervisory authority for FICUs.\2\ The FCU Act
grants NCUA a broad mandate to issue regulations governing both FCUs
and all FICUs. Section 120 of the FCU Act is a general grant of
regulatory authority and authorizes the Board to prescribe rules and
regulations for the administration of the FCU Act.\3\ Section 207 of
the FCU Act is a specific grant of authority over share insurance
coverage,
[[Page 50678]]
conservatorships, and liquidations.\4\ Section 209 of the FCU Act is a
plenary grant of regulatory authority to issue rules and regulations
necessary or appropriate to carry out its role as share insurer for all
FICUs.\5\ Accordingly, the FCU Act grants the Board broad rulemaking
authority to ensure that the federally insured credit union industry
and the Share Insurance Fund remain safe and sound.
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\2\ 12 U.S.C. 1752-1775.
\3\ 12 U.S.C. 1766(a).
\4\ 12 U.S.C. 1787.
\5\ 12 U.S.C. 1789.
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Section 107(5) of the FCU Act \6\ sets forth general requirements
that an FCU must comply with to make loans. Section 206 of the FCU Act
\7\ sets forth the Board's authority to intervene in situations where
any FICU, among other things, is engaging or has engaged in unsafe or
unsound practices in conducting its business.
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\6\ 12 U.S.C. 1757(5).
\7\ 12 U.S.C. 1786.
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II. Final Rule
A. Overview
This final rule follows publication of the proposed rule and takes
into consideration the comments received on the proposal. By the close
of the public comment period on May 26, 2026, the Board had received 14
public comments. Comments were submitted by credit unions, state credit
union leagues, national trade associations, and a national association
of state credit union supervisors. After careful consideration of the
issues raised by the commenters, the Board has decided to adopt the
proposal without change.
B. Discussion of Public Comments
This section of the preamble discusses the significant issues
raised by the commenters, and the Board's responses to the comments.
All 14 commenters offered unqualified support for the proposed
rule. Commenters generally appreciated NCUA's efforts to modernize its
regulatory framework governing indirect vehicle loans and agreed that
existing supervisory and risk-management frameworks already provide
meaningful safeguards. In general, commenters also stated that the
proposal will help reduce regulatory burden, improve competitive
equity, and allow credit unions to continue serving their members
responsibly. Additional details regarding the specific comments
received are included in the section-by-section analyses below.
C. 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 FCU 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 limit to 100 percent of net worth.
Paragraph (h)(2) sets forth a process for a FCU to request a waiver
from the concentration limits from its Regional Director. Paragraph
(h)(3) sets forth a timeline for 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.
Commenters generally stated that the existing concentration limits
do not sufficiently account for differences in institutional size,
sophistication, business strategy, and risk-management capabilities,
noting that the supervisory landscape has evolved considerably over the
past two decades. Commenters suggested that credit unions today operate
with varying levels of operational complexity, and boards are best
positioned to establish policies and procedures tailored to their
institution's indirect lending activities and overall risk profile.
Commenters further noted that, since 2006, NCUA has developed broader
supervisory expectations related to third-party vendor management,
enterprise risk management, internal controls, and board governance
that more comprehensively address these risks. Commenters also noted
that the waiver process can create administrative burden and
operational uncertainty despite the continued availability of
supervisory oversight through the examination process. Finally,
commenters pointed out that similar prescriptive concentration
restrictions generally do not apply to other insured depository
institutions participating in indirect auto lending markets so removing
Sec. 701.21(h) will remove a potential competitive disadvantage for
credit unions.
The Board agrees with commenters that 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 FCU'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 final rule removes current paragraph (h) from Sec.
701.21.
D. Sec. 741.203 Minimum Loan Policy Requirements
Sec. 741.203(c). Current Sec. 741.203(c) provides that federally
insured, state-chartered credit unions (FISCUs) 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.
Commenters generally stated that the requirements in current Sec.
741.203(c) can result in additional operational complexity without
providing meaningful supervisory benefit beyond the existing oversight
inherent in state and federal examination processes. Commenters stated
further that FISCUs already operate under robust supervisory frameworks
that include board oversight, risk-management expectations, vendor due
diligence requirements, and ongoing examination review by both state
regulators and NCUA. As with FCUs, commenters felt that FISCUs are
fully capable of developing policies and controls that appropriately
reflect the scale and complexity of their indirect lending activities.
Finally, commenters stated that safety and soundness objectives can be
more effectively achieved through risk-focused supervision and
institution-specific governance practices.
The provisions in Sec. 741.203(c) impose the same prescriptive
framework in Sec. 701.21(h) on FISCUs for the purchase of indirect
vehicle loans serviced by third parties. The Board also believes that a
FISCU's board is in the best position to develop policies that are
appropriately scaled for its purchases of indirect vehicle loans
serviced by third parties. Accordingly, consistent with the removal of
Sec. 701.21(h), the final rule also removes current paragraph (c) from
Sec. 741.203(c).
[[Page 50679]]
E. 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. NCUA did not receive comments on this change. Accordingly, the
final rule removes the citation to Sec. 701.21(h)(3) consistent with
the other changes made by this rule.
III. Regulatory Procedures
A. Executive Orders 12866, 13563, and 14192
Pursuant to Executive Order 12866 (``Regulatory Planning and
Review''), a determination must be made whether a regulatory action is
significant and therefore subject to review by the Office of
Information and Regulatory Affairs (OIRA), within the Office of
Management and Budget (OMB) in accordance with the requirements of the
Executive Order.\8\ 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.\9\ This final rule was drafted
and reviewed in accordance with Executive Order 12866 and Executive
Order 13563. OIRA has determined that this final rule is not a
``significant regulatory action'' as defined by section 3(f) of
Executive Order 12866.
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\8\ 58 FR 51735 (Oct. 4, 1993).
\9\ 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.\10\ This final rule is considered an Executive Order 14192
deregulatory action.
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\10\ 90 FR 9065 (Feb. 6, 2025).
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B. Regulatory Flexibility Act
The Regulatory Flexibility Act \11\ 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.\12\ For purposes of this
analysis, NCUA considers small credit unions to be those having under
$100 million in assets.\13\ The Board fully considered the potential
economic impacts of the regulatory amendments on small credit unions.
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\11\ 5 U.S.C.601 et seq.
\12\ 5 U.S.C. 605(b).
\13\ 80 FR 57512 (Sept. 24, 2015).
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The final rule will remove NCUA's regulation regarding third-party
servicing of indirect vehicle loans. This action reduces regulatory
burden and provides 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. Accordingly,
NCUA certifies the final rule will not have a significant economic
impact on a substantial number of small credit unions.
C. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (PRA) generally provides that
an agency may not conduct or sponsor, and not withstanding any other
provision of law, a person is not required to respond to a collection
of information, unless it displays a currently valid OMB control
number. The PRA applies to rulemaking 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. NCUA
has determined that the changes in the rule do not create a new
information collection or revise an existing information collection as
defined by the PRA. Accordingly, no PRA submissions to OMB will be made
with respect to this rule.
D. Executive Order 13132 on Federalism
Executive Order 13132 encourages independent regulatory agencies to
consider the impact of their actions on state and local interests.\14\
NCUA, an agency as defined in 44 U.S.C. 3502(5), voluntarily complies
with the executive order to adhere to fundamental federalism
principles. The rule would remove a prescriptive limitation that
currently applies to FISCUs, which would remove a federally imposed
restriction on state-chartered entities. The rulemaking will not have a
direct effect on the states, the relationship between the national
government and the states, or on the distribution of power and
responsibilities among various levels of government.
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\14\ 64 FR 43255 (Aug. 4, 1999).
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E. Assessment of Federal Regulations and Policies on Families
NCUA has determined that this final rule will not affect family
well-being within the meaning of Section 654 of the Treasury and
General Government Appropriations Act, 1999.\15\
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\15\ Public Law 105-277, 112 Stat. 2681 (1998).
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F. Congressional Review Act
Subtitle E of the Small Business Regulatory Enforcement Fairness
Act of 1996, also known as the Congressional Review Act (CRA),
generally provides for congressional review of agency rules.\16\ NCUA
must submit a report to Congress and the Comptroller General when it
issues a final rule, as defined by the CRA.\17\An agency rule, in
addition to being subject to congressional oversight, may also be
subject to a delayed effective date if the rule is a ``major rule.''
OIRA has determined that this rule is not a ``major rule'' within the
meaning of the relevant sections of the CRA. NCUA will also file
appropriate reports with Congress and the Comptroller General so this
rule may be reviewed.
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\16\ 5 U.S.C. 801-808.
\17\ 5 U.S.C. 804(3).
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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, this 29th day
of July, 2026.
Melane Conyers-Ausbrooks,
Secretary of the Board.
For the reasons discussed above, the NCUA Board amends 12 CFR parts
701, 741, and 746 as follows:
[[Page 50680]]
PART 701--ORGANIZATION AND OPERATION OF FEDERAL CREDIT UNIONS
0
1. The authority citation for part 701 is revised read as follows:
Authority: 12 U.S.C. 1752(5), 1755, 1756, 1757, 1758, 1759,
1761, 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 12 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 citation for part 741 continues to read as follows:
Authority: 12 U.S.C. 1757, 1766(a), 1781-1790, 1790d, 3331 et
seq; 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 citation 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. 2026-16029 Filed 8-5-26; 8:45 am]
BILLING CODE 7535-01-P
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</html>Indexed from Federal Register on August 6, 2026.
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.