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OCC BULLETIN 2018-48
To: Chief Executive Officers of All National Banks, Federal Savings Associations, and Federal Branches and Agencies of Foreign Banking Organizations; Department and Division Heads; All Examining Personnel; and Other Interested Parties

Description: Statement on Programs for Rehabilitation of Private Education Loans (Section 602 Rehabilitation Programs)

Summary

On May 24, 2018, the President signed the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA). Section 602 of the EGRRCPA amends the Fair Credit Reporting Act to give borrowers the opportunity to rehabilitate private education loans under certain conditions.1 National banks, federal savings associations, and federal branches and agencies (collectively, banks) that choose to offer such rehabilitation programs (referred to as section 602 rehabilitation programs) must receive Office of the Comptroller of the Currency (OCC) approval. This bulletin outlines the OCC's process for approving section 602 rehabilitation programs.

The OCC updated the "Student Lending" booklet of the Comptroller's Handbook to include information about section 602 rehabilitation programs. The "Student Lending" booklet also contains other updates to clarify supervisory guidance, sound risk management, and regulatory requirements, as well as to update references due to new and rescinded OCC issuances.

Rescissions

The updated "Student Lending" booklet replaces the booklet of the same title issued May 9, 2016. Also rescinded are the previous booklet's transmittal, OCC Bulletin 2016-15, "Student Lending: New Comptroller's Handbook Booklet," and CNBE Policy Guidance 2010-2, "Policy Interpretation: OCC Bulletin 2000-20—Application to Private Student Lending," which has been incorporated into the "Student Lending" booklet.

Note for Community Banks

This bulletin applies to all OCC-supervised banks that intend to offer a section 602 rehabilitation program.

Highlights

Banks intending to establish a section 602 rehabilitation program should

  • follow the OCC approval process explained in this bulletin, including making the request to the supervisory office at least 120 days before offering the program.
  • administer section 602 rehabilitation programs consistent with safe and sound banking practices and risk management principles.

Background

The EGRRCPA gives a private education loan borrower the option to request the removal of a default from his or her consumer report2 under certain conditions, including the following:

  • The bank offers a section 602 rehabilitation program that has been approved by the bank's appropriate federal banking agency.
  • The borrower successfully meets the bank's program criteria, which include making consecutive, on-time monthly payments that demonstrate a renewed willingness and ability to repay the loan in accordance with the program.
  • The borrower receives the benefit of removing a default only once per loan.

The EGRRCPA does not require banks to offer a section 602 rehabilitation program. Banks that choose to do so are entitled to section 602's safe harbor from claims of inaccuracy for removing a reported default from a borrower's consumer report.

The OCC supports banks' efforts to work with borrowers experiencing financial difficulties. Prudent and properly structured rehabilitation programs are often in the best interest of the bank and the borrower. Workout programs offered to financially distressed private education loan borrowers should be administered in a safe and sound manner and adhere to generally accepted accounting principles.

OCC Bulletin 2000-20, "Uniform Retail Credit Classification and Account Management Policy: Policy Implementation," provides guidance on classifying retail credits for regulatory purposes and establishing policies for working with borrowers experiencing temporary financial difficulties. The "Student Lending" booklet of the Comptroller's Handbook affirms to OCC examiners the fundamental principles of the Retail Classification Policy and the principles' applicability to private student lending while recognizing the unique aspects of higher education financing.3

Seeking the OCC's Approval for a Section 602 Rehabilitation Program

Banks intending to establish a section 602 rehabilitation program must seek written approval from their supervisory office concerning the proposed loan rehabilitation program, as required by section 602 of EGRCCPA. The OCC supervisory office will review a bank's program to assess whether it includes section 602's requirements to make a minimum number of consecutive, on-time, monthly payments that demonstrate the borrower's renewed ability and willingness to repay the loan and to notify the consumer reporting agencies of successful completion of any loan rehabilitation program.

In conjunction with its review of a bank's proposed section 602 rehabilitation program, the supervisory office will assess whether the proposed program is consistent with applicable laws, regulations, and safe and sound banking principles.

The OCC will provide feedback or notify the bank of its decision in writing within 120 days of receipt of a request for approval. If the OCC declines to approve a request, the OCC will notify the bank in writing of the reason for the OCC's decision. A bank may appeal the OCC's decision under the OCC's bank appeals process.4

Further Information

Please contact Steven Jones, Director for Retail Credit Risk, at (202) 649-6670.

 

Grace E. Dailey
Senior Deputy Comptroller for Bank Supervision Policy and Chief National Bank Examiner

Related Link

1 Pub. L. 115-174, section 602, amends the Fair Credit Reporting Act's section 623(a)(1), codified as 15 USC 1681s-2(a)(1).

2 Commensurate with the federal student loan rehabilitation program, the record of default would be removed from the borrower's credit history. The delinquency leading up to the default would remain.

3 Default on a student loan is not expressly defined in the interagency policy on retail credit classification. Closed-end loans that are 120 days past due generally are charged off. Refer to OCC Bulletin 2000-20.

4 Refer to OCC Bulletin 2013-15, "Bank Appeals Process: Guidance for Bankers."