ALEXANDRIA, Va.-With credit unions doing more and more business, such as leasing and indirect lending, with third-party vendors, credit unions need to polish their due diligence routines. While many of the arrangements are beneficial to credit unions and their members, failure to exercise due diligence could spell disaster. "These arrangements can make programs more cost-effective, enable credit unions access to expertise that has not been developed in-house, and promote programs that may not be feasible if entered into independently," a recent letter to credit unions (01-CU-20) read. "However, we are also aware of cases of third-party relationships resulting in financial stresses for credit unions due to unanticipated costs, legal disputes, and asset losses." NCUA suggested that credit unions review their activities for consistency with its overall business strategy and risk tolerances; perform a background check on the provider; perform a legal review, review the financial strength of the company; assess the expected revenue and expenses; and review insurance coverage. The process does not end once an agreement is entered into. Credit unions should create detailed policy guidance with program parameters, monitor the programs performance, and keep senior staff informed of findings, particularly non-compliance.