WASHINGTON – U.S. Senators Kevin Cramer (R-ND) and Elizabeth Warren (D-MA), Senate Banking Committee members, introduced the Bank Service Company Examination Coordination Act, a bipartisan bill to amend the Bank Service Company Act to appropriately reflect states’ authority to examine third-party technology service providers, improve information sharing, promote more effective oversight, and reduce regulatory burdens.

“The laws governing federal banking regulators and their oversight of banks’ cybersecurity efforts are silent when it comes to the role of state regulators, which has led to duplicative efforts and an inability to properly coordinate,” said Senator Cramer. “Our bipartisan legislation would give federal and state regulators much-needed clarity and improve their ability to work together to help protect consumers.”

“By ensuring that federal and state banking regulators can coordinate and share information about their exams of banks’ technology vendors, this legislation closes gaps in our current regulations,” said Senator Warren. “This important bipartisan effort will help protect consumers and the safety and soundness of our financial system.”

Banks often use third-party Technology Service Providers (TSP’s) to outsource services like loan and deposit taking, payment processing, IT security and testing, and call center operations. Recently, more banks have looked to partner with fintech firms. While these relationships are common, they can also expose banks and consumers to unique and serious risks. Current law authorizes federal regulators to examine TSP’s for potential risks, but it is silent on the role of state banking regulators, resulting in duplication and inefficient supervision. The Bank Service Company Examination Coordination Act would amend the BSCA to address this.

Senator Cramer led this bill last Congress, when the House of Representatives passed it by voice vote. It is cosponsored by Senators Cynthia Lummis (R-WY), Mazie Hirono (D-HI), Dianne Feinstein (D-CA), Mike Rounds (R-SD), and John Boozman (R-AR).

“The U.S. has long had a well-functioning dual banking system that gives state regulators the primary authority to charter new banks in their own states,” said Senator Lummis. “The Bank Service Company Examination Coordination Act will strengthen the supervisory authority of state regulators to ensure a more effective banking system for all.” 

“With the Bank Service Company Examination Coordination Act, Congress has an opportunity to pass bipartisan legislation that would improve cybersecurity protections for consumers by promoting better coordination between federal and state banking regulators,” said Senator Hirono. “I urge my colleagues to swiftly advance this smart bipartisan legislation.” 

The bill is endorsed by the Conference of State Bank Supervisors (CSBS).

“State bank regulators support enactment of the Bank Service Company Examination Coordination Act, which will enable better state-federal information sharing and exam coordination on banks’ third-party vendors,” said CSBS President John Ryan. “By working together, state and federal regulators can better mitigate risks for a financial institution and its customers and protect the stability of the entire banking system where state regulators oversee nearly four in every five U.S. banks. We thank Representatives Meeks (D-NY) and Williams (R-TX) along with Senators Cramer (R-ND) and Warren (D-MA) for advancing this important legislation.”

Click here for text of the bill.