On September 12, 2018, the Office of the Comptroller of the Currency (the “OCC“) released its first update to the “Deposit-Related Credit” booklet of the Comptroller’s Handbook (the “DRC Booklet“) since its March 2015 release. (The OCC initially released a widely-critiqued DRC Booklet in February of 2015 as a replacement to its “Credit Check” booklet, but this release was quickly withdrawn.) The DRC Booklet provides guidance to OCC examiners in their review of “deposit-related credit” (“DRC Products“) which typically constitute small-dollar, unsecured credit products related to a consumer’s deposit account, such as “check credit,” “overdraft protection services,” or “deposit advance products.”
Importantly, this is the first revision to the DRC Booklet since the OCC’s rescission of its guidance entitled “Supervisory Concerns and Expectations Regarding Deposit Advance Products” and corresponding OCC Bulletin 2013-40 that had effectively precluded banks subject to OCC supervision from offering deposit advance products. As we have previously discussed, the OCC recently has taken positive, if sometimes contradictory, steps towards encouraging banks to offer small-dollar credit, and the updated DRC Booklet appears to be another positive step forward. Among other things, it removes examination procedures related to burdensome “ability to repay” requirements as well as references to OCC Bulletin 2013-40’s risk management expectations.
The OCC’s revisions also attend to various housekeeping matters, such as the incorporation of recent OCC Bulletin 2018-14, “Installment Lending: Core Lending Principles for Short-Term, Small-Dollar Installment Lending,” OCC Bulletin 2017-21: “Third-Party Relationships” and OCC Bulletin 2017-43: New, Modified, or Expanded Bank Products and Services–Risk Management Principles,” and they integrate the Dodd-Frank concept of “unfair, deceptive, or abusive acts or practices.” Finally, the DRC Bulletin has been revised to clarify certain provisions of the Military Lending Act as they relate to DRC Products.
As we have noted, financial institutions such as national and federal savings banks may have opportunities to structure DRC Products that will not only fall outside the CFPB’s small-dollar rule but also meet supervisory expectations, produce substantial revenues and provide credit to otherwise credit-limited consumers. (And at least one major financial institution has already launched a program in this changing regulatory environment.) The revisions to the DRC Bulletin are yet another indication of the OCC’s increased permissiveness of DRC and other small-dollar products, and we will continue to provide updates on these regulatory changes as they occur.