01-CU-20 – Due Diligence Over Third-Party Service Providers

The Supervisory Letter provides guidance to credit unions on managing third-party relationships. The letter emphasizes that while third-party relationships can enhance services provided to members and make programs more cost-effective, they can also result in financial stresses due to unanticipated costs, legal disputes, and asset losses. Therefore, credit unions must exercise proper due diligence before entering into a relationship and set up controls to monitor performance.

“Credit union officials are responsible for planning, directing, and controlling the credit union’s affairs. To fulfill these duties, the officials should require a due diligence review prior to entering into any arrangement with a third party.”

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