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OCC BULLETIN 2013-11
Subject: Deposit Advance Products
Date: April 25, 2013
To: Chief Executive Officers of National Banks, Federal Savings Associations, Federal Branches and Agencies, Department and Division Heads, All Examining Personnel, and Other Interested Parties
Description: Proposed Guidance on Supervisory Concerns and Expectations Regarding Deposit Advance Products
The Office of the Comptroller of the Currency (OCC) issued for comment in the Federal Register proposed “Guidance on Deposit Advance Products.” The guidance would apply to all national banks and federal savings associations (collectively, banks). Concurrent with the proposed guidance, the OCC announced that it was withdrawing its proposed guidance on Deposit-Related Consumer Credit Products published on June 8, 2011.
A deposit advance product is a small-dollar, short-term loan that a bank makes available to a customer whose deposit account reflects recurring direct deposits. The customer is allowed to take out a loan, which is to be repaid from the proceeds of the customer’s next direct deposit. These loans typically have high fees, are repaid in a lump sum in advance of the customer’s other bills, and often do not utilize fundamental and prudent banking practices to determine the customer’s ability to repay the loan while still meeting other necessary financial obligations.
The OCC encourages banks to respond to customers’ short-term credit needs. However, banks should be aware that deposit advance products can pose a variety of safety and soundness, compliance, consumer protection, and other risks. The proposed guidance addresses how any bank offering these products may do so in a safe and sound manner without engaging in practices that would inappropriately increase credit, compliance, legal, and reputation risks to the institution.
The OCC plans to closely review the activities of banks that offer or propose to offer deposit advance products, through direct examination of the bank, examination of any third party participating in such transactions under an arrangement with the bank, and, where applicable, review of any licensing proposals involving this activity. These examinations will focus not only on safety and soundness risks, but also on compliance with applicable consumer protection laws.
The comment period on the proposed guidance ends 30 days from publication of the guidance in the Federal Register.
Please direct questions regarding the proposed guidance to Robert Piepergerdes, Director for Retail Credit Risk, (202) 649-6220; Kimberly Hebb, Director for Compliance Policy, (202) 649-5470; or Kenneth Lennon, Assistant Director for Community and Consumer Law, (202) 649-6350.
John C. Lyons Jr.