Acting Comptroller of the Currency Keith A. Noreika today approved rescission of the agency’s Guidance on Supervisory Concerns and Expectations Regarding Deposit Advance Products that was published in the Federal Register on November 26, 2013, and accompanying OCC Bulletin 2013-40.
In doing so, he issued the following statement:
Today, I approved rescission of the OCC’s guidance regarding deposit advance products, effective immediately. The final rule regarding short-term, small-dollar loans submitted to the Federal Register by the Consumer Financial Protection Bureau necessitates revisiting the OCC guidance. The OCC may consider issuing new guidance in the future.
The continuation of the OCC’s guidance would subject national banks and federal savings associations to potentially inconsistent regulatory direction and undue burden as they prepare to implement the requirements of the CFPB’s final rule. Moreover, in the years since the agency issued the guidance, it has become clear to me that it has become difficult for banks to serve consumers’ need for short-term, small-dollar credit. As a result, consumers who would rely on highly regulated banks and thrifts for these legitimate and well-regulated products to meet their financial needs turn to other, lesser regulated entities, which may result in consumer harm and expense. In ways, the guidance may even hurt the very consumers it is intended to help, the most marginalized, unbanked and underbanked portions of our society.
The OCC continues to encourage national banks and federal savings associations (collectively, banks) to offer responsible products that meet the short-term, small-dollar credit needs of consumers. The OCC 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. Banks should consider the following core principles that are reflected in existing OCC guidance when offering short-term, small-dollar loan products:
- All bank products should be consistent with safe and sound banking, treat customers fairly, and must 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 compliance with applicable federal consumer protection laws and regulations, management’s oversight, and relationships with third parties. The OCC will take appropriate action to address any unsafe or unsound banking practice or violations of law associated with these products, and to prevent harm to consumers.