In its Statement, the Board additionally notes the participation of third-party vendors in some banksвЂ™ programs, and shows the increased consumer and conformity danger that will be a consequence of insufficient administration oversight of these vendors. It stresses that fee-sharing or comparable plans with such vendors can make incentives for improper sustained usage of DAP loans by customers. The Board expects State user banking institutions to closely develop procedures observe vendor practices and outcomes, and also to mitigate and handle customer and conformity dangers into the design and advertising of any deposit advance items they feature.
Overview of the proposed Supervisory Guidance makes clear that the OCC therefore the FDIC look intent on pursuing a campaign that is rigorous change basically the techniques of banks at the mercy of their regulatory oversight that engage in deposit advance financing. The Agencies assert that they’ll work with a range that is full of and assessment authority, including possible reductions in CAMELS reviews (with attendant implications for deposit insurance coverage assessments), to perform their goals.
Possibly coincidentally, in coordinated actions three company times after launch of the proposed Supervisory Guidance, the OCC as well as the FDIC imposed money that is civil totaling ten dollars million and restitution requests aggregating $3.9 million on RBS people, N.A. and a joint venture partner for violations associated with the UDAP provisions of Section 5 regarding the FTC Act associated with overdraft payment and checking rewards programs, and incorrect management of stop-payment needs regarding pre-authorized recurring electronic fund transfers. [ix] These actions implemented other customer security enforcement purchases earlier in the day in 2013 because of the OCC together with FDIC.
Taken with the proposed Supervisory Guidance, the OCC and FDIC sales suggest a reinvigorated mindset to customer security things at the Agencies. It can consequently be recommended for nationwide banking institutions and State-chartered non-member banking institutions to think about carefully the modifications that could be required underneath the proposed Supervisory Guidance relating to any existing or contemplated deposit advance system.
The OCC and FDIC proposition on DAP comes at any given time once the CFPB, the main Federal customer protection regulator of big organizations, is earnestly learning the issue that is same. Based on its findings that are preliminary the CFPB shows so it will be acting in the foreseeable future on DAP in accordance with entities susceptible to its legislation.
The BoardвЂ™s Statement reflects an approach distinctive from compared to the Agencies towards the DAP problem. The Board emphasizes that its examiners will completely review all aspects of a bankвЂ™s deposit advance system for compliance with applicable legislation (such as the UDAP provisions of Section 5 associated with the FTC Act). It tips to dangers as a result of the utilization of third-party contractors, particularly where fee-sharing or any other plans create incentives for inappropriate overuse of DAP loans. Further, it directs State user banking institutions to mitigate dangers through item design also to implement procedures closely to monitor vendor that is third-party and results. It generally does not, but, enforce new measures that are prescriptive the usage supervisory tools.
The importance of the huge difference just isn’t completely clear. It might be a timing question just. Since the banks supervised because of the Board that provide DAP loans tend become adequate become susceptible to CFPB legislation, the Board may merely be deferring policy-making regarding the problem into the CFPB. The Board may feel its approach comports positively because of the allocation of main duty for customer security issues into the CFPB underneath the Dodd-Frank Act.
The OCC therefore the FDIC, but, each supervise a lot more banks that are underneath the $10 billion limit for entities at the mercy of CFPB regulation that is direct. The AgenciesвЂ™ action may stem from the want to restrict the spread of DAP beyond those supervised banking institutions currently providing products that are such. Long lasting motivation, the AgenciesвЂ™ proposed Supervisory Guidance is an even more assertive usage of supervisory authority as compared to BoardвЂ™s Statement.