InfoBytes Blog
Filter
Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
OCC Updates Comptroller's Handbook to Include New Student Lending Booklet
On May 9, the OCC updated its Comptroller’s Handbook to include a new booklet titled “Student Lending.” Despite banks having to alter their private student lending strategies as a result of the 2008 financial crisis, the OCC’s booklet maintains that banks can still benefit from the wider array of consumer products and the broader business model that the private student lending industry offers. The new booklet contains information related to banks’ participation in the private student lending industry, including, but not limited to:
- Inherent credit, interest rate, liquidity, price, operational, compliance, strategic, and reputation risks in the industry.
- Unique aspects of private student loans, such as the “significant time lag between loan advances and repayment, and the student borrower’s lack of certainty in finding a stable, reliable primary source of repayment after graduation.”
- Regulatory expectations for safe and sound operations, cautioning that banks should adhere to the credit underwriting and documentation standards as stated in 12 CFR 30, appendix A, “Safety and Soundness Standards.”
- Risk management practices, reminding banks that use third parties to market, solicit, or originate private student loans to have in place risk management frameworks that include due diligence in selecting third parties, written contracts that have been vetted for duties, obligations, and responsibilities of all parties (compensation parameters included), and ongoing monitoring and quality assurance programs.
Designed for examiners to use in their examination and supervision of banks involved in the private student lending industry, the booklet outlines two sets of examination procedures: (i) primary examination, when an examiner’s objective is to “assess risk level, evaluate the quality of risk management, and determine the aggregate level and direction of risk of the bank’s student lending activities”; and (ii) supplemental examination, when examiners “determine whether student lending marketing activities are consistent with the bank’s business plans, strategic plans, and risk appetite, and that appropriate controls and systems are in place before the bank rolls out new products or new-product marketing initiatives.” Finally, the booklet advises examiners reviewing banks’ student lending activities to “remain alert for lending practices and product terms that could indicate discriminatory, unfair, deceptive, abusive, or predatory issues.”
OCC "Deposit-Related Consumer Credit" Booklet of Comptroller's Handbook to be Amended
On February 20, the OCC announced that it would be removing the “Deposited-Related Consumer Credit” booklet, originally issued on February 11, from its website. The OCC’s February 11 booklet seemingly required banks to change overdraft protection services, however the agency has since stated that the booklet was not intended to establish new policy. According to the OCC’s website, the agency will “[revise] the booklet to clarify and restate the existing law, rules, and policy.” When the OCC releases its amended version of the booklet, we will update the February 16 Special Alert to reflect the agency's modifications.
OCC Updates Mortgage Handbook, Retirement Plan Products Handbook
On February 7, the OCC issued an updated Mortgage Banking booklet of the Comptroller's Handbook. The revised booklet (i) provides updated guidance to examiners and bankers on assessing the quantity of risk associated with mortgage banking and the quality of mortgage banking risk management; (ii) makes wholesale changes to the functional areas of production, secondary marketing, servicing, and mortgage servicing rights; and (iii) addresses recent CFPB amendments to Regulation X and Regulation Z, as well as other Dodd-Frank related statutory and regulatory changes. The updated booklet replaces a similarly titled booklet issued in March 1996, as well as Section 750 (Mortgage Banking) issued in November 2008 as part of the former OTS Examination Handbook. On February 12, the OCC issued a revised Retirement Plan Products and Services booklet of the Comptroller’s Handbook that (i) updates examination procedures and groups them by risk; (ii) updates references and adds a list of abbreviations; (iii) adds references to recent significant U.S. Department of Labor regulations and policy issuances; (iv) adds a discussion of Bank Secrecy Act/anti-money laundering and Regulation R; and (v) adds a discussion of board and senior management responsibilities regarding oversight of risk management.