[Federal Register Volume 82, Number 196 (Thursday, October 12, 2017)]
[Notices]
[Pages 47602-47603]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-22012]
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DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
[Docket ID OCC-2017-0019]
Rescission of Guidance on Supervisory Concerns and Expectations
Regarding Deposit Advance Products
AGENCY: Office of the Comptroller of the Currency (OCC), Treasury.
ACTION: Rescission of guidance.
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SUMMARY: The OCC is rescinding its supervisory guidance entitled
``Guidance on Supervisory Concerns and Expectations Regarding Deposit
Advance Products'' and OCC Bulletin 2013-40 (collectively, Guidance),
which address the OCC's expectations regarding the offering of deposit
advance products by national banks and federal savings associations
(collectively, banks). The OCC is rescinding the Guidance in light of
the adoption of a final rule on payday, vehicle title, and certain
high-cost installment loans by the Consumer Financial Protection Bureau
(CFPB), which overlaps with the Guidance, resulting in potentially
inconsistent regulatory guidance for banks.
DATES: This Guidance is rescinded effective October 5, 2017.
FOR FURTHER INFORMATION CONTACT: Paul Reymann, Director, Consumer
Compliance Policy, (202) 649-5470; Steven Jones, Director, Retail
Credit Risk, (202) 649-6220; Kenneth Lennon, Director, Community and
Consumer Law, (202) 649-6350; Office of the Comptroller of the
Currency, 400 7th Street SW., Washington, DC 20219 or, for persons who
are deaf or hard of hearing, TTY, (202) 649-5597.
SUPPLEMENTARY INFORMATION:
In 2013, the OCC issued the Guidance to set forth the agency's
expectations regarding deposit advance products offered by banks.\1\ A
deposit advance product is a small-dollar, short-term loan or line of
credit that a bank makes available to a customer whose deposit account
reflects recurring direct deposits. The customer obtains a loan, which
is to be repaid from the proceeds of the next direct deposit. The
Guidance highlighted potential credit, reputation, operational,
compliance, and other issues associated with deposit advance products
and encouraged banks to be aware of these issues so that banks offering
these products in response to their customers' short-term, small-dollar
credit needs did not engage in practices that would increase these
risks or result in the unfair treatment of bank customers.
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\1\ 78 FR 70624 (November 26, 2013).
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Since adoption of the Guidance in 2013, the regulatory and
marketplace landscapes have changed, and the OCC has gained supervisory
experience with application of the Guidance to deposit advance
products. Most recently, the CFPB adopted a rule entitled ``Payday,
Vehicle Title, and Certain High-Cost Installment Loans'' (CFPB's Final
Rule),\2\ regarding short-term, small-dollar loans, which overlaps with
the Guidance and will therefore apply to many of the loans addressed by
the Guidance. For example, the CFPB's Final Rule includes underwriting
requirements for covered loans that are inconsistent with certain
aspects of the Guidance. In addition, the CFPB's Final Rule provides
for cooling-off periods that differ from those set forth in the
Guidance. Thus, the continuation of the Guidance would subject banks to
potentially inconsistent regulatory direction and undue burden as banks
prepare to implement the requirements of the CFPB's Final Rule.
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\2\ Today the CFPB announced that it adopted and submitted the
CFPB's Final Rule for publication in the Federal Register. https://www.consumerfinance.gov/policy-compliance/rulemaking/final-rules/payday-vehicle-title-and-certain-high-cost-installment-loans/. The
CFPB issued its notice of proposed rulemaking on payday loans in
2016. 81 FR 47864 (July 22, 2016).
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In addition, based on the changed regulatory and marketplace
landscape and our supervisory experience noted above, the OCC is
concerned that banks are able to serve consumers' needs for short-term,
small-dollar credit. As a practical matter, consumers who would prefer
to rely on banks and thrifts for these products may be forced to rely
on less regulated lenders and be exposed to the risk of consumer harm
and expense.
Accordingly, the OCC is rescinding the Guidance. In rescinding the
Guidance, the OCC considered that many other OCC guidance documents
cover key elements of consumer lending, and these guidance documents
[[Page 47603]]
remain in effect and will continue to apply to deposit advance
products.\3\
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\3\ See, e.g., Advisory Letter 2000-7, ``Abusive Lending
Practices''; Comptroller's Handbook, ``Deposit-Related Credit''
(underwriting, credit administration, management oversight); OCC
Bulletin 2010-16, ``Guidance for Evaluating Capital Planning and
Adequacy'' (capital planning); OCC Bulletin 2001-37, ``ALLL
Methodologies and Documentation'' (ALLL); OCC Bulletin 2013-29,
``Third-Party Relationships: Risk Management Guidance,'' as
supplemented by OCC Bulletin 2017-21, ``Third-Party Relationships:
Frequently Asked Questions to Supplement OCC Bulletin 2013-29.'' The
``Deposit-Related Credit'' booklet, which provides guidance to and
procedures for examiners, will be revised to remove references to
the Guidance.
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The OCC continues to support and encourage banks and savings
associations to develop and use innovative products to meet customers'
short-term, small-dollar credit needs and will continue to ensure that
banks that choose to offer this type of product do so responsibly. In
providing deposit advance products and other short-term, small-dollar
loans, banks should be guided by basic principles of prudent
underwriting and risk management as well as fair and inclusive
treatment of customers. In particular, banks should consider the
following core principles when offering innovative, short-term, small-
dollar loan products:
All bank products should be consistent with safe and sound
banking, treat customers fairly, and comply with applicable laws and
regulations.
Banks should effectively manage the risks associated with
the products they offer, including credit, operational, compliance, and
reputation.
All credit products should be underwritten based on
reasonable policies and practices, including guidelines governing the
amounts borrowed, frequency of borrowing, and repayment requirements.
OCC examiners will continue to assess how banks offer short-term,
small-dollar loan products, including whether management oversight is
appropriate, whether risks posed by third-party relationships are
appropriately managed, and whether the product complies with applicable
federal consumer protection statutes. The OCC will take appropriate
action to address any unsafe or unsound banking practice or violations
of law associated with these products.
Dated: October 5, 2017.
Keith A. Noreika,
Acting Comptroller of the Currency.
[FR Doc. 2017-22012 Filed 10-11-17; 8:45 am]
BILLING CODE 4810-33-P