Guidance on Deposit-Related Consumer Credit Products, 33409-33413 [2011-14093]
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Federal Register / Vol. 76, No. 110 / Wednesday, June 8, 2011 / Notices
advanced air bags has been delayed 24
months because the cost of the Evora
project was greater than expected,
Lotus’s revenues were less than
expected, and its financial constraints
were exacerbated by the global
economic recession and automobile
market downturn in late 2008. As a
result, Lotus alleges that it was unable
to fully fund the next-generation Elise
program while developing the Evora.
Lotus also reiterates that the Evora’s
advanced air bag system does not carry
over to the next generation Elise. Lotus
notes that, after discovering this, it
reexamined the possibility of equipping
the current Elise with advanced air bags,
in light of changes in the supplier
situation since its last effort in 2005.
However, Lotus concluded that
advanced air bags for the current Elise
remain infeasible.
Lotus also contends that an extension
is in the public interest and consistent
with the objectives of the Safety Act,
citing the reasons stated in the
September 2006 grant. Lotus states that
the air bags in the Elise do not pose a
safety risk. In support, Lotus cites the
fact that there are no known injuries or
deaths to infants, children, or other
occupants caused by its air bags; that its
crashworthy design provides a high
level of safety without advanced air
bags; and that its passenger seat is fixed
in the rearmost position. In addition,
Lotus makes clear in its owner’s manual
that it does not recommend the Elise be
used for transporting children. Lotus
also notes that, if an exemption is not
granted, consumers would be adversely
affected due to the loss of the Elise from
the marketplace. Further, Lotus notes
that the Elise is fuel efficient and it will
comply with all other FMVSSs.
sroberts on DSK5SPTVN1PROD with NOTICES
IV. Completeness and Comment Period
Upon receiving a petition, NHTSA
conducts an initial review of the
petition with respect to whether the
petition is complete and whether the
petitioner appears to be eligible to apply
for the requested petition. The agency
has tentatively concluded that the
petition from Lotus is complete and that
Lotus is eligible for an extension of its
temporary exemption. The agency has
not made any judgment on the merit of
the application, and is placing a nonconfidential copy of the petition in the
docket.
We are providing a 30-day comment
period. After considering public
comments and other available
information, we will publish a notice of
final action on the application in the
Federal Register.
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Issued on: June 1, 2011.
Christopher J. Bonanti,
Associate Administrator for Rulemaking.
[FR Doc. 2011–14180 Filed 6–7–11; 8:45 am]
BILLING CODE 4910–59–P
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the
Currency
[Docket ID OCC–2011–0012]
Guidance on Deposit-Related
Consumer Credit Products
Office of the Comptroller of the
Currency, Treasury (OCC).
ACTION: Proposed guidance with request
for comment.
AGENCY:
The Office of the Comptroller
of the Currency (OCC) is proposing
guidance on safe and sound banking
practices in connection with depositrelated consumer credit products. Such
products include automated overdraft
protection and direct deposit advance
programs.
SUMMARY:
Comments must be submitted on
or before July 8, 2011.
ADDRESSES: Because paper mail in the
Washington, DC area and at the OCC is
subject to delay, commenters are
encouraged to submit comments by email, if possible. Please use the title
‘‘Guidance on Deposit-Related
Consumer Credit Products’’ to facilitate
the organization and distribution of the
comments. You may submit comments
by any of the following methods:
• E-mail: regs.comments@occ.
treas.gov.
• Mail: Office of the Comptroller of
the Currency, 250 E Street, SW., Mail
Stop 2–3, Washington, DC 20219.
• Fax: (202) 874–5274.
• Hand Delivery/Courier: 250 E
Street, SW., Mail Stop 2–3, Washington,
DC 20219.
Instructions: You must include ‘‘OCC’’
as the agency name and ‘‘Docket ID
OCC–2011–0012’’ in your comment. In
general, OCC will enter all comments
received into the docket and publish
them on the Regulations.gov Web site
without change, including any business
or personal information that you
provide such as name and address
information, e-mail addresses, or phone
numbers. Comments received, including
attachments and other supporting
materials, are part of the public record
and subject to public disclosure. Do not
enclose any information in your
comment or supporting materials that
you consider confidential or
inappropriate for public disclosure.
DATES:
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33409
You may review comments and other
related materials that pertain to this
notice by any of the following methods:
• Viewing Comments Personally: You
may personally inspect and photocopy
comments at the OCC, 250 E Street,
SW., Washington, DC. For security
reasons, the OCC requires that visitors
make an appointment to inspect
comments. You may do so by calling
(202) 874–4700. Upon arrival, visitors
will be required to present valid
government-issued photo identification
and to submit to security screening in
order to inspect and photocopy
comments.
• Docket: You may also view or
request available background
documents and project summaries using
the methods described above.
FOR FURTHER INFORMATION CONTACT:
Michael S. Bylsma, Director,
Community and Consumer Law
Division, (202) 874–5750; Grovetta
Gardineer, Deputy Comptroller for
Compliance Policy, (202) 874–4428; or
Kevin Russell, Director, Retail Credit
Risk, (202) 874–5170, Office of the
Comptroller of the Currency, 250 E
Street, SW., Washington, DC 20219.
SUPPLEMENTARY INFORMATION:
The Office of the Comptroller of the
Currency (OCC) is proposing
supervisory guidance to clarify the
OCC’s application of principles of safe
and sound banking practices in
connection with deposit-related
consumer credit products such as
automated overdraft protection and
direct deposit advance programs. This
guidance details the principles that the
OCC expects national banks to follow in
connection with any deposit-related
consumer credit product to address
potential operational, reputational,
compliance, and credit risks. This
approach provides a high degree of
flexibility for banks to structure and
operate their programs in a prudent and
safe and sound manner that provides for
fair treatment of customers without
dictating specific product terms. The
OCC expects national banks to apply the
principles set forth in this guidance to
any deposit-related consumer credit
product they offer. Appendixes to this
guidance illustrate application of these
principles to two specific consumer
credit products—automated overdraft
protection products and deposit
advance products.
Pursuant to Title III of the Dodd-Frank
Wall Street Reform and Consumer
Protection Act, effective July 21, 2011,
all functions of the Office of Thrift
Supervision (OTS) and the Director of
the OTS relating to Federal savings
associations is transferred to the OCC.
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As a result, the OCC will assume
responsibilities for the ongoing
examination, supervision, and
regulation of Federal savings
associations. Any final guidance on
deposit-based credit products in effect
for national banks on or after July 21,
2011 will also apply to Federal savings
associations.
Text of Proposed Guidance
The text of the proposed Supervisory
guidance on deposit-related consumer
credit products follows:
Supervisory Guidance On DepositRelated Consumer Credit Products
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Purpose
The Office of the Comptroller of the
Currency (OCC) is issuing guidance to
clarify the OCC’s application of
principles of safe and sound banking
practices in connection with depositrelated consumer credit products such
as automated overdraft protection and
direct deposit advance programs. This
bulletin details the principles that the
OCC expects national banks to follow in
connection with any deposit-related
consumer credit product to address
potential operational, reputational,
compliance, and credit risks. This
approach provides a high degree of
flexibility for banks to structure and
operate their programs in a prudent and
safe and sound manner that provides for
fair treatment of customers without
dictating specific product terms.
The principles articulated in this
guidance are predicated on the premise
that bankers should provide their
customers with products they need, and
that bankers should not use these
products to take advantage of their
customer relationship. Through its
supervisory process, the OCC has found
that a small percentage, but not an
insignificant number, of banks are
administering deposit-related consumer
credit programs without proper
attention to these risks. In some cases,
these program weaknesses are strikingly
apparent.
The OCC accordingly expects national
banks to apply the principles outlined
in this bulletin to any deposit-related
consumer credit product they offer. The
OCC expects bankers and examiners to
use sound judgment and common sense
when applying these principles to
specific programs and products.
Appendixes to this bulletin illustrate
application of these principles to two
specific consumer credit products—
automated overdraft protection products
and deposit advance products.
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Supervisory Principles Applicable To
Deposit-Related Consumer Credit
Products
• Disclosure—Customers should be
provided clear and conspicuous
disclosures prior to enrollment,
consistent with applicable law, about
program costs, terms, and material
limitations before they are provided a
deposit-related credit product.
Customers also should be provided
information about alternative depositrelated credit products, if any, offered
by the bank.
• Legal compliance—Any depositrelated credit product, and the manner
in which it is offered or marketed, must
comply with applicable law, including
the prohibition against unfair and
deceptive practices in the Federal Trade
Commission Act.1
• Affirmative request—Customers
should not be automatically enrolled in
programs for deposit-related credit
products. Enrollment should occur only
after the customer has received
appropriate disclosures, has made an
affirmative request for the product, and
has agreed to abide by product terms,
including associated fees.2 Before
approving the customer for the product,
the bank should have sufficient
information about the customer to
evaluate that the customer meets the
bank’s eligibility standards, as described
below. Account materials and marketing
should not mislead customers about the
optional nature of the product or
otherwise promote routine use or undue
reliance on deposit-related credit
products.
• Program availability and prudent
eligibility standards—Policies and
procedures should set forth the
eligibility criteria that must be met by a
depositor to obtain the deposit-related
credit product. An appropriate degree of
analysis should be conducted before the
request is approved to determine
whether the customer will be able to
manage and repay the credit obligations
arising from the product appropriately.
• Prudent limitations on product
costs and usage—Deposit-related credit
products should be subject to prudent
limitations on credit extensions,
customer costs, and usage. Fees should
be based on safe and sound banking
1 See OCC Advisory Letter 2002–3, ‘‘Guidance on
Unfair or Deceptive Acts or Practices,’’ (Mar. 22,
2002).
2 Unless otherwise specified in regulation or
guidance, banks have flexibility in how they obtain
a customer’s affirmative request, including through
clear and conspicuous language in an application,
separate opt-in form, or account agreement whereby
the customer affirmatively consents to be enrolled
in the program and to pay any related fees for the
service.
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principles,3 and take into account other
appropriate factors including reputation
and strategic risks to the bank. For
example, a bank should consider the
significance of revenue from a particular
product and monitor for any undue
reliance on the fees generated by that
product for its revenue and earnings.
• Monitoring and risk assessments—
The volume of, and revenue from,
deposit-related credit products and
changes in customer usage should be
regularly monitored to identify risks.
Appropriate action should be taken to
address any risks that are identified
including excessive usage and
nonperformance, such as reassessing a
customer’s creditworthiness; adjusting
credit terms, fees, or limits; suspending
or terminating the credit feature; or
closing accounts.
• Management oversight—Bank
management should exercise
appropriate oversight of new products
and services, through receipt and review
of regular reports on product usage, fee
income, and legal compliance, and
through periodic audits. Appropriate
oversight includes monitoring of thirdparty vendors that provide services
related to the product. Bank
management should be vigilant in
assuring adherence to these principles
and should take immediate steps to
address noncompliance and reputation
risks.
• Account management and chargeoffs—Applicable guidelines on account
management and charge-offs of
uncollectible balances also should be
followed.
Appendix A
Safe and Sound Banking Practices in
Connection with Automated Overdraft
Protection Programs
Retail overdraft protection programs
have evolved in significant ways since
the federal banking agencies issued the
‘‘Joint Agency Guidance on Overdraft
Protection Programs’’ in 2005.4 With the
increasing volume of electronic
transactions during this period,
overdraft protection has evolved from a
program that functions primarily in the
context of check-based overdrafts to one
that functions increasingly in the
context of electronic payments-based
overdrafts. These developments, in turn,
have presented new operational risks
and increasing credit risks posed by
customers who use the product
extensively. The OCC is concerned with
3 See
12 CFR 7.4002.
FR 9127 (Feb. 24, 2005). https://www.gpo.gov/
fdsys/pkg/FR–2005–02–24/pdf/05–3499.pdf
4 70
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several practices that have developed
during this intervening time, including:
• Excessive reliance on fee income
from overdraft protection programs;
• Failure to impose responsible limits
on customer costs and imposition of
fees that cumulatively exceed a
customer’s overdraft credit limit;
• Failure to assess a customer’s
ability to manage and repay overdraft
protection before it is made available to
the customer;
• Failure to monitor overdraft
protection usage to identify excessive
usage and credit risks and to take steps
to address credit risks;
• Failure to charge off overdrafts in a
timely manner;
• Failure to ensure adequate risk
management of overdraft protection
programs, with appropriate internal
audits and compliance reviews;
• Failure to monitor and control
promotional and sales practices for
potentially misleading statements; and
• Payment processing intended to
maximize overdrafts and related fees.
While certain new rules have been
implemented recently affecting
overdraft protection programs,5 the OCC
believes additional supervisory
guidance is warranted to address the
heightened safety and soundness risks
that have arisen over time affecting the
broad range of retail transactions
covered by overdraft protection
programs. This appendix describes how
the OCC will apply the safety and
soundness principles applicable to
deposit-related consumer credit
products to overdraft protection.
This appendix updates and expands
on the 2005 ‘‘Joint Agency Guidance on
Overdraft Protection Programs’’ (joint
agency guidance). The OCC expects
national banks to develop policies and
procedures governing automated retail
overdraft protection programs that
implement both this guidance and the
joint agency guidance, including the
section entitled ‘‘Best Practices,’’ as
applicable.6
Scope
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All automated overdraft protection
plans that cover overdrafts from
electronic (including ATM, point of sale
(POS), preauthorized debits, and online
banking transactions) and check-based
consumer transactions are subject to the
5 See 12 CFR 205.17 (Regulation E) and 12 CFR
230.11 (Regulation DD).
6 This joint agency guidance describes the
circumstances concerning when overdraft
protection programs may be subject to certain
requirements in the Truth in Lending Act and the
Equal Credit Opportunity Act. This appendix is not
intended to affect whether or when such laws may
apply to a particular program.
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principles described in this appendix.
Ad hoc and accommodation payment of
overdrafts to an individual customer are
not addressed in this appendix.7
Program Availability and Prudent
Eligibility Standards
National banks should adopt policies
and procedures concerning the
availability of overdraft protection that
set forth eligibility criteria that must be
met by a depositor to obtain automated
overdraft protection. Such policies and
procedures should provide that a
customer must ‘‘opt-in’’ to the program,
such as by making an affirmative
request or application to be enrolled in
the service and affirmatively agreeing to
pay any fee that may be imposed for
payment of overdrafts arising from
debits, checks, POS and ACH
transactions, as applicable.8 Account
materials and marketing should not
mislead customers about the optional
nature of the program or otherwise
promote routine use or undue reliance
on the program.9
If not already conducted as part of the
initial deposit account opening,
prudential criteria for enrolling a
customer in an overdraft protection
program should include an initial
assessment of the customer’s risk with
respect to overdraft account privileges.
The scope and rigor of this assessment
may vary depending on the credit and
deposit profile of the customer and
other relevant risk factors, but an
objective should be to determine
whether the customer poses undue risks
as indicated by, for instance, a history
of overdrawing an account or
information suggesting an inability or
unwillingness to repay credit.
A customer should be permitted to
‘‘opt-out’’ of program coverage at any
time after which no additional overdraft
fees may be imposed, and be provided
clear notice of this ability.
7 National banks that authorize overdrafts on an
ad hoc and accommodation basis should control for
and manage any related reputational and
compliance risks.
8 Regulation E prohibits financial institutions
from assessing a fee or charge on a customer’s
account for paying an overdraft resulting from an
ATM or one-time debit transaction unless the
institution has obtained the customer’s affirmative
written consent. 12 CFR 205.17(b). For overdraft
programs that are not already covered by the
Regulation E opt-in requirements, such as checkbased overdrafts, affirmative consent need only be
obtained from new account holders. Banks have
flexibility in how they obtain a customer’s
affirmative request, provided that there is clear
disclosure of the terms and fees and customer
consent.
9 See OCC Bulletin 2010–15, ‘‘Overdraft
Protection: Opt-In Requirements and Related
Marketing Issues.’’
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Disclosures
Customers who apply for and obtain
overdraft protection should be provided
sufficient information about a product’s
costs, risks, and limitations when the
product is offered to make an informed
choice. Customers also should be
provided information about alternative
overdraft services and credit products, if
any, offered by the bank. In addition to
receiving cost information, as required
by the joint agency guidance, customers
also should receive disclosure of the
following information to manage their
account prudently:
• Clear disclosure about the order of
processing transactions and the fact that
the order can affect the total amount of
overdraft fees incurred by a customer.
• Notice when overdraft protection is
suspended or terminated, and when it is
reinstated, as applicable.
As required by the Truth in Savings
Act regulations, banks that provide
periodic statements to customers must
disclose the total dollar amount of
overdraft fees that have been imposed
during the period and year-to-date.10
Prudent Limitations
National banks should establish
prudent programmatic limitations on
the amount of credit that may be
extended under an overdraft protection
program, the number of overdrafts and
the total amount of fees that may be
imposed per day and per month, and
any transaction amount below which an
overdraft fee will not be imposed. These
limitations should be established taking
into account general ability to repay and
safety and soundness considerations
and the order in which the bank
processes transactions. These
limitations should be clearly disclosed
to customers at the time the product is
offered.11
The order in which transactions will
be processed also should be subject to
standards to ensure that transaction
processing is not solely designed or
generally operated to maximize
overdraft fee income. For example, such
standards may provide for processing
individual or batched items in the order
received, by check or serial number
sequence, or in random order.
Monitoring and Risk Assessments
Accounts should be subject to
monitoring and segmentation by
customer usage to detect indications of
excessive overdrafts (and related
10 12
CFR 230.11.
prudential limitations may include
offering a grace period of one or more days to allow
a customer to return the account to a positive
balance before any overdraft fee may be imposed.
11 Other
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overdraft protection fees) and/or
potential changes to repayment capacity
with respect to the overdraft product. A
national bank should review and
evaluate the account as they deem
appropriate, such as in the following
circumstances:
• The account has incurred overdrafts
in excess of the overdraft credit limit
applicable to the account;
• The account has incurred the daily
maximum number of overdraft
transactions repeatedly during any
month, whether or not a fee is imposed;
• The account has incurred the daily
maximum number of overdraft fees
repeatedly during any month; and
• The accountholder is exhibiting
excessive usage of other credit products
connected to the account.
In such circumstances, the bank
should determine whether the account
continues to be viable or whether credit
and aggregate fee limits need to be
reduced, and take appropriate action.
Such a determination should include a
more in-depth analysis of the borrower’s
ability to manage and repay overdraft
protection. The customer also should be
notified of alternatives to overdraft
protection, such as linked deposit
accounts, or other lines of credit.
If, after account review and making
any appropriate changes to an account,
the account continues to demonstrate
excessive overdrafts, overdraft
privileges should be terminated and, if
appropriate, the account should be
closed.
Management Oversight
Bank management should receive
regular reports on overdraft volume,
profitability, and credit performance.
These reports should segment accounts
by level of overdrafts to identify
excessive overdraft protection usage.
Management also should receive reports
that describe the status and outcome of
internal reviews and evaluations of
accounts identified as demonstrating
excessive usage.
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Charge-Offs
Overdraft protection should be
suspended or terminated when the
customer no longer meets the eligibility
criteria, has declared bankruptcy, or is
in default on repayment of an overdraft
or on any other loan with the bank.
Overdraft balances should be charged
off when considered uncollectible, but
no later than 60 days from the date first
overdrawn. If an account has been
continually overdrawn for 60 days or
more, it must be closed and charged off.
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Appendix B
Safe and Sound Banking Practices in
Connection with Deposit Advance
Programs
‘‘Deposit advance’’ products are shortterm, open-end lines of credit that are
generally made available to retail
account holders with recurring direct
deposits. These products typically
operate as follows: advances under the
line of credit are made only upon
request by the customer and are limited
to the amount, or a portion of the
amount, of the anticipated deposit.
Advances are made in fixed dollar
increments and a flat fee is assessed for
each advance. For example, a customer
may obtain advances in increments of
$10 or $20 for $1 or $2 per increment
borrowed. Multiple advances can be
outstanding at any time up to any credit
limit that has been established. Full
repayment typically is required during a
single deposit cycle—the amount
advanced, plus the applicable finance
charge, is usually repaid when the next
direct deposit is credited to a customer’s
account. If a deposit is insufficient to
repay the advance in full, repayment
may be made with the next or
subsequent deposits.
There are various practices associated
with deposit advance products that raise
operational and credit risks and
supervisory concerns, including:
• Failure to evaluate the customer’s
ability to repay the credit line
appropriately, taking into account the
customer’s recurring deposits and other
relevant information;
• Requiring full repayment of the
advance out of a single deposit, which
reduces the funds available to customers
for daily living expenses, which can
cause overdrafts;
• Steering customers who rely on
direct deposits of federal benefits
payments as their principal source of
income to deposit advance products;
• Failure to disclose the costs of
deposit advances; and
• Failure to monitor accounts for
excessive usage and costs.
This appendix describes how the OCC
will apply the safety and soundness
principles applicable to deposit-related
consumer credit products to deposit
advance products.
Product Availability and Prudent
Eligibility Standards
National banks should adopt policies
and procedures that set forth eligibility
criteria that must be met by a retail
depositor to obtain the deposit advance
service. Such policies and procedures
also should provide that a customer
must ‘‘opt-in’’ to the program, by making
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an affirmative request or application for
enrollment in the deposit advance
program and affirmatively agreeing to
pay any fee imposed for the service.12
Account materials and marketing
should not mislead customers about the
optional nature of the program or
otherwise promote routine use or undue
reliance on the product.
Prudential criteria for enrolling a
customer in a deposit advance program
should include risk assessment criteria.
Such criteria would include an
assessment of the customer’s
willingness and ability to repay the
advance based on information about the
customer’s continued employment or
other recurrent source(s) of income from
which the direct deposit is derived and
other relevant information.
A customer should be permitted to
‘‘opt-out’’ of program coverage at any
time, after which no future advances
may be made or related fees imposed,
and be provided clear notice of this
ability.
Disclosures
Customers should receive clear and
conspicuous disclosures—before the
customer is enrolled—about key
program criteria and limitations, costs,
and risks. For example, these
disclosures would:
• Describe the operation, fees, costs,
and any limitations on the program;
• Explain that direct deposit
advances can be costly and inform
customers of alternative deposit-related
credit products, if any, offered by the
bank.
• Explain transaction-processing
policies for repayment of a credit
advance including, as applicable, the
fact that repayment may take priority
over the processing of other items such
as checks and could result in overdrafts
or returned items and associated fees;
• Explain how the loan must be
repaid if a deposit is insufficient; and
• Describe key program features
affecting program protections, including
any rescission or refund policies,
cancellation policies, and cooling-off
periods.
Prudent Limitations
National banks should establish
prudent programmatic limitations that
generally take into account the amount
of the customer’s recurring direct
deposits; the need for a portion of
deposited funds to remain available to
the customer for daily expenses;
account usage; and credit extended to
12 Affirmative consent need only be obtained in
connection with new enrollments in a deposit
advance program.
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the customer, including other depositbased loans, if applicable. These include
limits on:
• The number of periods that back-toback advances may be made before a
cooling-off period will be triggered;
• The number of months in which
advances may be outstanding;
• The total amount or percentage of
any deposit that may be advanced in
any period; and
• The total amount or percentage of
any deposit that may be used for
repayment of the advance.
These limits should be adjusted, as
appropriate, based on risks identified
through account monitoring. For
example, if a customer’s direct deposits
stop, no further extensions of credit
should be permitted under the program.
Repayment Terms
Deposit advances should be permitted
to be repaid by direct deposit or by
separate payment in advance of the date
a deposit would be debited without any
additional fee. When program terms
allow for substantial advances relative
to the regular deposit amount, advances
should be permitted to be repaid in
more than one installment over an
extended period of more than one
month. National banks should not
permit repayments of deposit advances
that would overdraw the account or
permit additional advances during any
periods of account overdraft.
Monitoring and Risk Assessments
Deposit-advance accounts should be
subject to reasonable periodic
monitoring to ensure that circumstances
have not changed that adversely affect
credit risk and to identify excessive
usage. Monitoring should include
overdraft and returned-item activity in
the account. There should be
appropriate follow up with the
customer, if warranted, about use of the
account, repayment options, and credit
alternatives.
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Management Oversight
Bank management should receive
regular reports on volume, profitability,
and credit performance of the deposit
advance program. These reports should
segment accounts by level of line usage
to identify excessive deposit-advance
usage. Management also should receive
reports that describe the status and
outcome of internal reviews and
evaluations of accounts identified as
demonstrating excessive usage.
Charge-Offs
Deposit advances that are not repaid
in accordance with the account terms
should be charged off.
VerDate Mar<15>2010
21:51 Jun 07, 2011
Jkt 223001
Dated: June 1, 2011.
John Walsh,
Acting Comptroller of the Currency.
[FR Doc. 2011–14093 Filed 6–7–11; 8:45 am]
BILLING CODE P
DEPARTMENT OF THE TREASURY
Financial Crimes Enforcement Network
Proposed Renewal Without Change;
Comment Request; Nine Bank Secrecy
Act Recordkeeping Requirements
Notice and request for
comments.
ACTION:
As part of our continuing
effort to reduce paperwork and
respondent burden, we invite comment
on a proposed renewal, without change,
to recordkeeping requirements found in
existing regulations requiring financial
institutions to keep records pertaining
to Bank Secrecy Act (BSA) reportable
activities. This request for comments is
being made pursuant to the Paperwork
Reduction Act of 1995, Public Law 104–
13, 44 U.S.C. 3506(c)(2)(A).
SUMMARY:
Written comments are welcome
and must be received on or before
August 8, 2011.
DATES:
Written comments should
be submitted to: Financial Crimes
Enforcement Network, P.O. Box 39,
Vienna, VA 22183, Attention: BSA
Recordkeeping Requirements
Comments. Comments also may be
submitted by electronic mail to the
following Internet address:
regcomments@fincen.gov, again with a
caption, in the body of the text, ‘‘BSA
Recordkeeping Requirements
Comments.’’
ADDRESSES:
FOR FURTHER INFORMATION CONTACT:
Financial Crimes Enforcement Network,
Regulatory Policy and Programs
Division at (800) 949–2732, option 6.
SUPPLEMENTARY INFORMATION:
Abstract: The Director of the
Financial Crimes Enforcement Network
(FinCEN) is the delegated administrator
of the BSA. The BSA authorizes the
Director to issue regulations to require
all financial institutions defined as such
in the BSA to maintain or file certain
reports or records that have been
determined to have a high degree of
usefulness in criminal, tax, or regulatory
investigations or proceedings, or in the
conduct of intelligence or counterintelligence activities, including
analysis, to protect against international
terrorism, and to implement anti-money
PO 00000
Frm 00223
Fmt 4703
Sfmt 4703
33413
laundering programs and compliance
procedures.1
Regulations implementing section
5318(h)(1) of the BSA are found in part
at 31 CFR chapter X. In general, the
regulations require financial
institutions, as defined in 31 U.S.C.
5312(a)(2) and 31 CFR 1010.100 to
maintain financial records of BSA
covered transactions.
1. Title: Special rules for casinos 31
CFR 1021.210(b), 31 CFR 1021.100(a)(e)(Old Ref. 31 CFR 103.64), and 31 CFR
1010.430 (Old Ref. 31 CFR 103.38).
OMB Number: 1506–0051.
Current Action: There is no change to
the existing regulation.
Type of Review: Extension without
change of a currently approved
information collection.
Affected Public: Businesses and other
for-profit institutions.
Burden: The estimated number of
recordkeepers is 925. The estimated
annual recordkeeping burden per
recordkeeper is 100 hours, for a total
estimated annual recordkeeping burden
of 92,500 hours.
2. Title: Additional records to be
made and retained by currency dealers
or exchangers (31 CFR 1022.410 (Old
Ref. 31 CFR 103.37) and 31 CFR
1010.430 (Old Ref. 31 CFR 103.38) .
OMB Number: 1506–0052.
Current Action: There is no change to
the existing regulation.
Type of Review: Extension without
change of a currently approved
information collection.
Affected Public: Businesses and other
for-profit institutions.
Burden: The estimated number of
recordkeepers is 2,300. The estimated
annual recordkeeping burden per
recordkeeper is 16 hours, for a total
estimated annual recordkeeping burden
of 368,000 hours.
3. Title: Additional records to be
made and retained by brokers or dealers
in securities (31 CFR 1023.410 (Old Ref.
31 CFR 103.35) and 31 CFR 1010.410
(Old Ref. 103.38).
OMB Number: 1506–0053.
Current Action: There is no change to
the existing regulation.
Type of Review: Extension without
change of a currently approved
information collection.
Affected Public: Businesses and other
for-profit institutions.
1 Public Law 91–508, as amended and codified at
12 U.S.C. 1829b, 12 U.S.C. 1951–1959 and 31 U.S.C.
5311–5332. Language expanding the scope of the
BSA to intelligence or counter-intelligence
activities to protect against international terrorism
was added by section 358 of the Uniting and
Strengthening America by Providing Appropriate
Tools Required to Intercept and Obstruct Terrorism
(USA PATRIOT) Act of 2001, Pubic Law 107–56.
E:\FR\FM\08JNN1.SGM
08JNN1
]]>Agencies
[Federal Register Volume 76, Number 110 (Wednesday, June 8, 2011)]
[Notices]
[Pages 33409-33413]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-14093]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
[Docket ID OCC-2011-0012]
Guidance on Deposit-Related Consumer Credit Products
AGENCY: Office of the Comptroller of the Currency, Treasury (OCC).
ACTION: Proposed guidance with request for comment.
-----------------------------------------------------------------------
SUMMARY: The Office of the Comptroller of the Currency (OCC) is
proposing guidance on safe and sound banking practices in connection
with deposit-related consumer credit products. Such products include
automated overdraft protection and direct deposit advance programs.
DATES: Comments must be submitted on or before July 8, 2011.
ADDRESSES: Because paper mail in the Washington, DC area and at the OCC
is subject to delay, commenters are encouraged to submit comments by e-
mail, if possible. Please use the title ``Guidance on Deposit-Related
Consumer Credit Products'' to facilitate the organization and
distribution of the comments. You may submit comments by any of the
following methods:
E-mail: regs.comments@occ.treas.gov.
Mail: Office of the Comptroller of the Currency, 250 E
Street, SW., Mail Stop 2-3, Washington, DC 20219.
Fax: (202) 874-5274.
Hand Delivery/Courier: 250 E Street, SW., Mail Stop 2-3,
Washington, DC 20219.
Instructions: You must include ``OCC'' as the agency name and
``Docket ID OCC-2011-0012'' in your comment. In general, OCC will enter
all comments received into the docket and publish them on the
Regulations.gov Web site without change, including any business or
personal information that you provide such as name and address
information, e-mail addresses, or phone numbers. Comments received,
including attachments and other supporting materials, are part of the
public record and subject to public disclosure. Do not enclose any
information in your comment or supporting materials that you consider
confidential or inappropriate for public disclosure.
You may review comments and other related materials that pertain to
this notice by any of the following methods:
Viewing Comments Personally: You may personally inspect
and photocopy comments at the OCC, 250 E Street, SW., Washington, DC.
For security reasons, the OCC requires that visitors make an
appointment to inspect comments. You may do so by calling (202) 874-
4700. Upon arrival, visitors will be required to present valid
government-issued photo identification and to submit to security
screening in order to inspect and photocopy comments.
Docket: You may also view or request available background
documents and project summaries using the methods described above.
FOR FURTHER INFORMATION CONTACT: Michael S. Bylsma, Director, Community
and Consumer Law Division, (202) 874-5750; Grovetta Gardineer, Deputy
Comptroller for Compliance Policy, (202) 874-4428; or Kevin Russell,
Director, Retail Credit Risk, (202) 874-5170, Office of the Comptroller
of the Currency, 250 E Street, SW., Washington, DC 20219.
SUPPLEMENTARY INFORMATION:
The Office of the Comptroller of the Currency (OCC) is proposing
supervisory guidance to clarify the OCC's application of principles of
safe and sound banking practices in connection with deposit-related
consumer credit products such as automated overdraft protection and
direct deposit advance programs. This guidance details the principles
that the OCC expects national banks to follow in connection with any
deposit-related consumer credit product to address potential
operational, reputational, compliance, and credit risks. This approach
provides a high degree of flexibility for banks to structure and
operate their programs in a prudent and safe and sound manner that
provides for fair treatment of customers without dictating specific
product terms. The OCC expects national banks to apply the principles
set forth in this guidance to any deposit-related consumer credit
product they offer. Appendixes to this guidance illustrate application
of these principles to two specific consumer credit products--automated
overdraft protection products and deposit advance products.
Pursuant to Title III of the Dodd-Frank Wall Street Reform and
Consumer Protection Act, effective July 21, 2011, all functions of the
Office of Thrift Supervision (OTS) and the Director of the OTS relating
to Federal savings associations is transferred to the OCC.
[[Page 33410]]
As a result, the OCC will assume responsibilities for the ongoing
examination, supervision, and regulation of Federal savings
associations. Any final guidance on deposit-based credit products in
effect for national banks on or after July 21, 2011 will also apply to
Federal savings associations.
Text of Proposed Guidance
The text of the proposed Supervisory guidance on deposit-related
consumer credit products follows:
Supervisory Guidance On Deposit-Related Consumer Credit Products
Purpose
The Office of the Comptroller of the Currency (OCC) is issuing
guidance to clarify the OCC's application of principles of safe and
sound banking practices in connection with deposit-related consumer
credit products such as automated overdraft protection and direct
deposit advance programs. This bulletin details the principles that the
OCC expects national banks to follow in connection with any deposit-
related consumer credit product to address potential operational,
reputational, compliance, and credit risks. This approach provides a
high degree of flexibility for banks to structure and operate their
programs in a prudent and safe and sound manner that provides for fair
treatment of customers without dictating specific product terms.
The principles articulated in this guidance are predicated on the
premise that bankers should provide their customers with products they
need, and that bankers should not use these products to take advantage
of their customer relationship. Through its supervisory process, the
OCC has found that a small percentage, but not an insignificant number,
of banks are administering deposit-related consumer credit programs
without proper attention to these risks. In some cases, these program
weaknesses are strikingly apparent.
The OCC accordingly expects national banks to apply the principles
outlined in this bulletin to any deposit-related consumer credit
product they offer. The OCC expects bankers and examiners to use sound
judgment and common sense when applying these principles to specific
programs and products. Appendixes to this bulletin illustrate
application of these principles to two specific consumer credit
products--automated overdraft protection products and deposit advance
products.
Supervisory Principles Applicable To Deposit-Related Consumer Credit
Products
Disclosure--Customers should be provided clear and
conspicuous disclosures prior to enrollment, consistent with applicable
law, about program costs, terms, and material limitations before they
are provided a deposit-related credit product. Customers also should be
provided information about alternative deposit-related credit products,
if any, offered by the bank.
Legal compliance--Any deposit-related credit product, and
the manner in which it is offered or marketed, must comply with
applicable law, including the prohibition against unfair and deceptive
practices in the Federal Trade Commission Act.\1\
---------------------------------------------------------------------------
\1\ See OCC Advisory Letter 2002-3, ``Guidance on Unfair or
Deceptive Acts or Practices,'' (Mar. 22, 2002).
---------------------------------------------------------------------------
Affirmative request--Customers should not be automatically
enrolled in programs for deposit-related credit products. Enrollment
should occur only after the customer has received appropriate
disclosures, has made an affirmative request for the product, and has
agreed to abide by product terms, including associated fees.\2\ Before
approving the customer for the product, the bank should have sufficient
information about the customer to evaluate that the customer meets the
bank's eligibility standards, as described below. Account materials and
marketing should not mislead customers about the optional nature of the
product or otherwise promote routine use or undue reliance on deposit-
related credit products.
---------------------------------------------------------------------------
\2\ Unless otherwise specified in regulation or guidance, banks
have flexibility in how they obtain a customer's affirmative
request, including through clear and conspicuous language in an
application, separate opt-in form, or account agreement whereby the
customer affirmatively consents to be enrolled in the program and to
pay any related fees for the service.
---------------------------------------------------------------------------
Program availability and prudent eligibility standards--
Policies and procedures should set forth the eligibility criteria that
must be met by a depositor to obtain the deposit-related credit
product. An appropriate degree of analysis should be conducted before
the request is approved to determine whether the customer will be able
to manage and repay the credit obligations arising from the product
appropriately.
Prudent limitations on product costs and usage--Deposit-
related credit products should be subject to prudent limitations on
credit extensions, customer costs, and usage. Fees should be based on
safe and sound banking principles,\3\ and take into account other
appropriate factors including reputation and strategic risks to the
bank. For example, a bank should consider the significance of revenue
from a particular product and monitor for any undue reliance on the
fees generated by that product for its revenue and earnings.
---------------------------------------------------------------------------
\3\ See 12 CFR 7.4002.
---------------------------------------------------------------------------
Monitoring and risk assessments--The volume of, and
revenue from, deposit-related credit products and changes in customer
usage should be regularly monitored to identify risks. Appropriate
action should be taken to address any risks that are identified
including excessive usage and nonperformance, such as reassessing a
customer's creditworthiness; adjusting credit terms, fees, or limits;
suspending or terminating the credit feature; or closing accounts.
Management oversight--Bank management should exercise
appropriate oversight of new products and services, through receipt and
review of regular reports on product usage, fee income, and legal
compliance, and through periodic audits. Appropriate oversight includes
monitoring of third-party vendors that provide services related to the
product. Bank management should be vigilant in assuring adherence to
these principles and should take immediate steps to address
noncompliance and reputation risks.
Account management and charge-offs--Applicable guidelines
on account management and charge-offs of uncollectible balances also
should be followed.
Appendix A
Safe and Sound Banking Practices in Connection with Automated Overdraft
Protection Programs
Retail overdraft protection programs have evolved in significant
ways since the federal banking agencies issued the ``Joint Agency
Guidance on Overdraft Protection Programs'' in 2005.\4\ With the
increasing volume of electronic transactions during this period,
overdraft protection has evolved from a program that functions
primarily in the context of check-based overdrafts to one that
functions increasingly in the context of electronic payments-based
overdrafts. These developments, in turn, have presented new operational
risks and increasing credit risks posed by customers who use the
product extensively. The OCC is concerned with
[[Page 33411]]
several practices that have developed during this intervening time,
including:
---------------------------------------------------------------------------
\4\ 70 FR 9127 (Feb. 24, 2005). https://www.gpo.gov/fdsys/pkg/FR-2005-02-24/pdf/05-3499.pdf
---------------------------------------------------------------------------
Excessive reliance on fee income from overdraft protection
programs;
Failure to impose responsible limits on customer costs and
imposition of fees that cumulatively exceed a customer's overdraft
credit limit;
Failure to assess a customer's ability to manage and repay
overdraft protection before it is made available to the customer;
Failure to monitor overdraft protection usage to identify
excessive usage and credit risks and to take steps to address credit
risks;
Failure to charge off overdrafts in a timely manner;
Failure to ensure adequate risk management of overdraft
protection programs, with appropriate internal audits and compliance
reviews;
Failure to monitor and control promotional and sales
practices for potentially misleading statements; and
Payment processing intended to maximize overdrafts and
related fees.
While certain new rules have been implemented recently affecting
overdraft protection programs,\5\ the OCC believes additional
supervisory guidance is warranted to address the heightened safety and
soundness risks that have arisen over time affecting the broad range of
retail transactions covered by overdraft protection programs. This
appendix describes how the OCC will apply the safety and soundness
principles applicable to deposit-related consumer credit products to
overdraft protection.
---------------------------------------------------------------------------
\5\ See 12 CFR 205.17 (Regulation E) and 12 CFR 230.11
(Regulation DD).
---------------------------------------------------------------------------
This appendix updates and expands on the 2005 ``Joint Agency
Guidance on Overdraft Protection Programs'' (joint agency guidance).
The OCC expects national banks to develop policies and procedures
governing automated retail overdraft protection programs that implement
both this guidance and the joint agency guidance, including the section
entitled ``Best Practices,'' as applicable.\6\
---------------------------------------------------------------------------
\6\ This joint agency guidance describes the circumstances
concerning when overdraft protection programs may be subject to
certain requirements in the Truth in Lending Act and the Equal
Credit Opportunity Act. This appendix is not intended to affect
whether or when such laws may apply to a particular program.
---------------------------------------------------------------------------
Scope
All automated overdraft protection plans that cover overdrafts from
electronic (including ATM, point of sale (POS), preauthorized debits,
and online banking transactions) and check-based consumer transactions
are subject to the principles described in this appendix. Ad hoc and
accommodation payment of overdrafts to an individual customer are not
addressed in this appendix.\7\
---------------------------------------------------------------------------
\7\ National banks that authorize overdrafts on an ad hoc and
accommodation basis should control for and manage any related
reputational and compliance risks.
---------------------------------------------------------------------------
Program Availability and Prudent Eligibility Standards
National banks should adopt policies and procedures concerning the
availability of overdraft protection that set forth eligibility
criteria that must be met by a depositor to obtain automated overdraft
protection. Such policies and procedures should provide that a customer
must ``opt-in'' to the program, such as by making an affirmative
request or application to be enrolled in the service and affirmatively
agreeing to pay any fee that may be imposed for payment of overdrafts
arising from debits, checks, POS and ACH transactions, as
applicable.\8\ Account materials and marketing should not mislead
customers about the optional nature of the program or otherwise promote
routine use or undue reliance on the program.\9\
---------------------------------------------------------------------------
\8\ Regulation E prohibits financial institutions from assessing
a fee or charge on a customer's account for paying an overdraft
resulting from an ATM or one-time debit transaction unless the
institution has obtained the customer's affirmative written consent.
12 CFR 205.17(b). For overdraft programs that are not already
covered by the Regulation E opt-in requirements, such as check-based
overdrafts, affirmative consent need only be obtained from new
account holders. Banks have flexibility in how they obtain a
customer's affirmative request, provided that there is clear
disclosure of the terms and fees and customer consent.
\9\ See OCC Bulletin 2010-15, ``Overdraft Protection: Opt-In
Requirements and Related Marketing Issues.''
---------------------------------------------------------------------------
If not already conducted as part of the initial deposit account
opening, prudential criteria for enrolling a customer in an overdraft
protection program should include an initial assessment of the
customer's risk with respect to overdraft account privileges. The scope
and rigor of this assessment may vary depending on the credit and
deposit profile of the customer and other relevant risk factors, but an
objective should be to determine whether the customer poses undue risks
as indicated by, for instance, a history of overdrawing an account or
information suggesting an inability or unwillingness to repay credit.
A customer should be permitted to ``opt-out'' of program coverage
at any time after which no additional overdraft fees may be imposed,
and be provided clear notice of this ability.
Disclosures
Customers who apply for and obtain overdraft protection should be
provided sufficient information about a product's costs, risks, and
limitations when the product is offered to make an informed choice.
Customers also should be provided information about alternative
overdraft services and credit products, if any, offered by the bank. In
addition to receiving cost information, as required by the joint agency
guidance, customers also should receive disclosure of the following
information to manage their account prudently:
Clear disclosure about the order of processing
transactions and the fact that the order can affect the total amount of
overdraft fees incurred by a customer.
Notice when overdraft protection is suspended or
terminated, and when it is reinstated, as applicable.
As required by the Truth in Savings Act regulations, banks that
provide periodic statements to customers must disclose the total dollar
amount of overdraft fees that have been imposed during the period and
year-to-date.\10\
---------------------------------------------------------------------------
\10\ 12 CFR 230.11.
---------------------------------------------------------------------------
Prudent Limitations
National banks should establish prudent programmatic limitations on
the amount of credit that may be extended under an overdraft protection
program, the number of overdrafts and the total amount of fees that may
be imposed per day and per month, and any transaction amount below
which an overdraft fee will not be imposed. These limitations should be
established taking into account general ability to repay and safety and
soundness considerations and the order in which the bank processes
transactions. These limitations should be clearly disclosed to
customers at the time the product is offered.\11\
---------------------------------------------------------------------------
\11\ Other prudential limitations may include offering a grace
period of one or more days to allow a customer to return the account
to a positive balance before any overdraft fee may be imposed.
---------------------------------------------------------------------------
The order in which transactions will be processed also should be
subject to standards to ensure that transaction processing is not
solely designed or generally operated to maximize overdraft fee income.
For example, such standards may provide for processing individual or
batched items in the order received, by check or serial number
sequence, or in random order.
Monitoring and Risk Assessments
Accounts should be subject to monitoring and segmentation by
customer usage to detect indications of excessive overdrafts (and
related
[[Page 33412]]
overdraft protection fees) and/or potential changes to repayment
capacity with respect to the overdraft product. A national bank should
review and evaluate the account as they deem appropriate, such as in
the following circumstances:
The account has incurred overdrafts in excess of the
overdraft credit limit applicable to the account;
The account has incurred the daily maximum number of
overdraft transactions repeatedly during any month, whether or not a
fee is imposed;
The account has incurred the daily maximum number of
overdraft fees repeatedly during any month; and
The accountholder is exhibiting excessive usage of other
credit products connected to the account.
In such circumstances, the bank should determine whether the
account continues to be viable or whether credit and aggregate fee
limits need to be reduced, and take appropriate action. Such a
determination should include a more in-depth analysis of the borrower's
ability to manage and repay overdraft protection. The customer also
should be notified of alternatives to overdraft protection, such as
linked deposit accounts, or other lines of credit.
If, after account review and making any appropriate changes to an
account, the account continues to demonstrate excessive overdrafts,
overdraft privileges should be terminated and, if appropriate, the
account should be closed.
Management Oversight
Bank management should receive regular reports on overdraft volume,
profitability, and credit performance. These reports should segment
accounts by level of overdrafts to identify excessive overdraft
protection usage. Management also should receive reports that describe
the status and outcome of internal reviews and evaluations of accounts
identified as demonstrating excessive usage.
Charge-Offs
Overdraft protection should be suspended or terminated when the
customer no longer meets the eligibility criteria, has declared
bankruptcy, or is in default on repayment of an overdraft or on any
other loan with the bank. Overdraft balances should be charged off when
considered uncollectible, but no later than 60 days from the date first
overdrawn. If an account has been continually overdrawn for 60 days or
more, it must be closed and charged off.
Appendix B
Safe and Sound Banking Practices in Connection with Deposit Advance
Programs
``Deposit advance'' products are short-term, open-end lines of
credit that are generally made available to retail account holders with
recurring direct deposits. These products typically operate as follows:
advances under the line of credit are made only upon request by the
customer and are limited to the amount, or a portion of the amount, of
the anticipated deposit. Advances are made in fixed dollar increments
and a flat fee is assessed for each advance. For example, a customer
may obtain advances in increments of $10 or $20 for $1 or $2 per
increment borrowed. Multiple advances can be outstanding at any time up
to any credit limit that has been established. Full repayment typically
is required during a single deposit cycle--the amount advanced, plus
the applicable finance charge, is usually repaid when the next direct
deposit is credited to a customer's account. If a deposit is
insufficient to repay the advance in full, repayment may be made with
the next or subsequent deposits.
There are various practices associated with deposit advance
products that raise operational and credit risks and supervisory
concerns, including:
Failure to evaluate the customer's ability to repay the
credit line appropriately, taking into account the customer's recurring
deposits and other relevant information;
Requiring full repayment of the advance out of a single
deposit, which reduces the funds available to customers for daily
living expenses, which can cause overdrafts;
Steering customers who rely on direct deposits of federal
benefits payments as their principal source of income to deposit
advance products;
Failure to disclose the costs of deposit advances; and
Failure to monitor accounts for excessive usage and costs.
This appendix describes how the OCC will apply the safety and
soundness principles applicable to deposit-related consumer credit
products to deposit advance products.
Product Availability and Prudent Eligibility Standards
National banks should adopt policies and procedures that set forth
eligibility criteria that must be met by a retail depositor to obtain
the deposit advance service. Such policies and procedures also should
provide that a customer must ``opt-in'' to the program, by making an
affirmative request or application for enrollment in the deposit
advance program and affirmatively agreeing to pay any fee imposed for
the service.\12\ Account materials and marketing should not mislead
customers about the optional nature of the program or otherwise promote
routine use or undue reliance on the product.
---------------------------------------------------------------------------
\12\ Affirmative consent need only be obtained in connection
with new enrollments in a deposit advance program.
---------------------------------------------------------------------------
Prudential criteria for enrolling a customer in a deposit advance
program should include risk assessment criteria. Such criteria would
include an assessment of the customer's willingness and ability to
repay the advance based on information about the customer's continued
employment or other recurrent source(s) of income from which the direct
deposit is derived and other relevant information.
A customer should be permitted to ``opt-out'' of program coverage
at any time, after which no future advances may be made or related fees
imposed, and be provided clear notice of this ability.
Disclosures
Customers should receive clear and conspicuous disclosures--before
the customer is enrolled--about key program criteria and limitations,
costs, and risks. For example, these disclosures would:
Describe the operation, fees, costs, and any limitations
on the program;
Explain that direct deposit advances can be costly and
inform customers of alternative deposit-related credit products, if
any, offered by the bank.
Explain transaction-processing policies for repayment of a
credit advance including, as applicable, the fact that repayment may
take priority over the processing of other items such as checks and
could result in overdrafts or returned items and associated fees;
Explain how the loan must be repaid if a deposit is
insufficient; and
Describe key program features affecting program
protections, including any rescission or refund policies, cancellation
policies, and cooling-off periods.
Prudent Limitations
National banks should establish prudent programmatic limitations
that generally take into account the amount of the customer's recurring
direct deposits; the need for a portion of deposited funds to remain
available to the customer for daily expenses; account usage; and credit
extended to
[[Page 33413]]
the customer, including other deposit-based loans, if applicable. These
include limits on:
The number of periods that back-to-back advances may be
made before a cooling-off period will be triggered;
The number of months in which advances may be outstanding;
The total amount or percentage of any deposit that may be
advanced in any period; and
The total amount or percentage of any deposit that may be
used for repayment of the advance.
These limits should be adjusted, as appropriate, based on risks
identified through account monitoring. For example, if a customer's
direct deposits stop, no further extensions of credit should be
permitted under the program.
Repayment Terms
Deposit advances should be permitted to be repaid by direct deposit
or by separate payment in advance of the date a deposit would be
debited without any additional fee. When program terms allow for
substantial advances relative to the regular deposit amount, advances
should be permitted to be repaid in more than one installment over an
extended period of more than one month. National banks should not
permit repayments of deposit advances that would overdraw the account
or permit additional advances during any periods of account overdraft.
Monitoring and Risk Assessments
Deposit-advance accounts should be subject to reasonable periodic
monitoring to ensure that circumstances have not changed that adversely
affect credit risk and to identify excessive usage. Monitoring should
include overdraft and returned-item activity in the account. There
should be appropriate follow up with the customer, if warranted, about
use of the account, repayment options, and credit alternatives.
Management Oversight
Bank management should receive regular reports on volume,
profitability, and credit performance of the deposit advance program.
These reports should segment accounts by level of line usage to
identify excessive deposit-advance usage. Management also should
receive reports that describe the status and outcome of internal
reviews and evaluations of accounts identified as demonstrating
excessive usage.
Charge-Offs
Deposit advances that are not repaid in accordance with the account
terms should be charged off.
Dated: June 1, 2011.
John Walsh,
Acting Comptroller of the Currency.
[FR Doc. 2011-14093 Filed 6-7-11; 8:45 am]
BILLING CODE P
