In recent months, there has been a noted increase in the number of questions and conversations about the Bank Service Company Act (or "BSCA"). In this article, responses will be offered for several frequently asked questions, such as:
The BSCA is a regulation which establishes a set of rules regarding financial institution relationships with certain third-party service providers, AKA "bank service companies."
According to the act, a "bank service company" is a service provider who provides one or more of the following services:
In addition, the regulation states that the company must be solely owned by financial institutions.
However, section 1867(c) goes on to explain that any vendor which provides one of the services identified above may be subject to examination and the bank is expected to notify their primary federal regulator within 30 days of beginning a relationship with one of these vendors.
Increased emphasis is being placed on the BSCA now for three primary reasons:
Additionally, the FDIC, FRB, and OCC have published a new rule titled Computer-Security Incident Notification Requirements for Banking Organizations and Their Bank Service Providers . The rule requires bank service providers, subject to BSCA, to provide notification to "at least one bank-designated point of contact at each affected banking organization customer." To learn more about this new rule and how it applies to bank service companies, see our blog: The New Incident Notification Rule: What Banks Need to Know .
The original BSCA requires financial institutions to notify their federal regulator, in writing, within 30 days of signing a contract or beginning service with a bank service company. The FDIC has developed a Notification of Performance of Bank Services form to assist with this notification.
To determine if you are complying:
Yes, Tandem Vendor Management is designed to help financial institutions oversee their third-party service provider arrangements, in accordance with applicable guidance and regulations. Tandem offers several useful features for addressing the BSCA requirements, including:
To see how Tandem Vendor Management can help you, learn more at Tandem.App/Vendor-Management-Software.
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