On April 4, acting Comptroller of the Currency Michael J. Hsu provided his remarks for the second year in a row at the Just Economy Conference hosted by the National Community Reinvestment Coalition. He focused his remarks on the latest developments of the Office of the Comptroller of the Currency (OCC) in its continuing efforts to elevate fairness in the financial industry.

He began his remarks by providing an update on the OCC’s commitment to promoting safe, sound and fair bank overdraft protection programs. He specifically cited the release of guidance by the OCC to assist banks in managing various risks associated with overdrafts. He noted two specific practices identified in the guidance – “authorize positive, settle negative” and representment – which could result in heightened risk exposure and further stated that the guidance “highlights sound risk management and pro-consumer practices that banks can employ to strengthen their overdraft protection programs.” He noted, however, that even with the progress made to date, gaps still remained in overdraft protection, such as the current inability of core processors to completely identify and address representment practices.

Comptroller Hsu further commented on the progress of the OCC in strengthening fair lending supervision. The OCC continues to deploy an enhanced-risk supervision process, using the fair lending risk assessment and Home Mortgage Disclosure Act data. He said the OCC has developed new methods to run screens on the data to identify potentially discriminatory conduct by OCC-supervised banks, such as redlining and the exclusion of communities of color from Community Reinvestment Act assessment areas. The OCC has also implemented a program to provide more advanced, real-time support to fair lending reviews.

He also provided an update on the work of Project REACh, which brings together leaders in banking, civil rights, community advocacy, business, and technology to identify and reduce barriers to financial inclusion for underserved and minority communities. He identified three areas on which Project REACh has focused:

  • Assisting credit invisibles, who are the consumers who cannot access credit because they lack a credit file and do not have a FICO score. As a part of Project REACh, several national banks have undertaken a pilot program to use alternative, non-FICO data to qualify consumers for first-time credit cards;
  • Revitalizing minority depository institutions (MDIs), in which it has enrolled the assistance of twenty-six banks to sign a pledge to support MDIs with over $500 million in financial support and technical assistance. The banks have also created an MDI Fintech Playbook and an online portal through which MDI employees can receive specialized training and information; and
  • Expanding access to affordable housing for low-and-moderate-income communities, including promoting home ownership on tribal lands. Project REACh has helped facilitate the launch of special purpose credit programs aimed at providing mortgage financing for minority communities as well as expanding the supply of affordable housing through accessory dwelling units.

He ended his remarks by addressing two emerging areas in elevating fairness: artificial intelligence and fraud. He advised that artificial intelligence has the potential to reduce bias and enable fair access to credit and banking services, but also has the same potential to perpetuate or exacerbate already-existing biases, discrimination and unfairness in the data. The use of artificial intelligence has also contributed to the rise in consumer fraud, as sophisticated digital tools used by fraudsters has made it easier to generate deepfakes, clone voices and otherwise defraud individuals and businesses. He noted, however, that “[t]o successfully fight AI-driven fraud will likely require AI-driven solutions.”

His full remarks can be found here.

Also see our previous blog about FDIC Chairman Gruenberg’s remarks to the National Community Reinvestment Coalition on the FDIC’s economic inclusion strategy, which can be found here.