On August 4, 2013, the Office of the Comptroller of the Currency
("OCC") released new guidance to (Bulletin 2014-37)
regulated entities on the application of consumer protection
requirements and safe and sound banking practices to consumer
debt-sale arrangements with third parties (e.g., debt buyers) that
intend to pursue collection of the underlying obligations.
This new guidance takes the place of a best practices document
provided in July 2013 to the Senate Subcommittee on Financial
Institutions and Consumer Protection. It emphasizes that
banks must be cognizant of the significant risks associated with
debt-sale arrangements, including operational, compliance,
reputation, and strategic risks. The OCC's view is that
banks that engage in debt sales should do so in a safe and sound
manner and in compliance with applicable laws—including
consumer protection laws.
The guidance describes the OCC's expectations for banks that
engage in debt-sale arrangements, including
- ensuring that appropriate internal policies and procedures have been developed and implemented to govern debt-sale arrangements consistently across the bank.
- performing appropriate due diligence when selecting debt buyers.
- ensuring that debt-sale arrangements with debt buyers cover all important considerations.
- providing accurate and comprehensive information regarding each debt sold, at the time of sale.
- ensuring compliance by the bank with applicable consumer protection laws and regulations.
- implementing appropriate oversight of debt-sale arrangements.
The guidance makes clear that if OCC examiners find unsafe or
unsound practices or practices that fail to comply with applicable
laws or regulations, the OCC may bring enforcement actions.
For example, the OCC announced a large enforcement action with
a major bank regarding its collection activities
in September 2013. The guidance also states that when the OCC
becomes aware of concerns with nonbank debt buyers, the agency
refers those issues to the CFPB, which has jurisdiction over these
entities.
As OCC Bulletin 2014-37 is effective immediately, banks should
consider and enhance their debt sales programs to achieve full
compliance with the new guidance. At the same time, would-be
debt buyers should consider and enhance their compliance management
systems and compliance programs in order to meet the expectations
of banks and their supervisory examiners.
A copy of the Bulletin can be found here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
